The US economy continues to show signs of positivity following yesterday’s manufacturing PMI. GBPUSD exchange rates have fallen 2 cents following the UK’s official announcement as to when it plans to leave the EU.

US Dollar sellers have now been provided the best opportunity to buy Sterling since the UK’s referendum, and In my opinion, this window of opportunity should be acted upon sooner rather than later.

US elections will cause US Dollar volatility

The US elections are now 2 months away and polls show a narrow victory for Hillary Clinton. What we must consider is not what the polls suggest, but who is likely to go out and vote on the day. Similarly to the Brexit vote, Trump supporters who are growing increasingly frustrated with the status quo are more likely to turn out and vote on the day. Hillary Clinton is also an unpopular choice amongst some, and when push comes to shove will half-hearted voters support her on the day or stay at home?

It could only be a matter of weeks before markets grow increasingly anxious about the outcome of the US elections, changing the course of action for GBP/USD exchange rates.

If Trump does become the next President, what implications will this have for the US Dollar and their economy and how could this affect the FED’s decision to raise interest rates by the end of the year?

Trump victory to damage FED decision

Even with strong economic data I cannot see the FED raising interest rates at their next meeting in November, just a few days ahead of the US elections. Whilst the FED operate independently from political events they cannot ignore the potential implications of a Trump victory on the markets. Trump remains a controversial which makes him a serious unknown to markets. His recent comments about Fed Chairlady Yellen regarding her handling of the US economy has prompted some to believe she may resign if he assumes leadership.

With concerns that a Trump victory could shrink US GDP, it would be just as surprising to see the FED raise interest rates in December if he is elected which is why I believe further weakness for the US Dollar could occur by the end of the year if he wins.

On the other hand, a Clinton victory could see US Dollar strength at the end of the campaign, and in my opinion, a FED interest rate hike is more likely for December.

US Dollar sellers should therefore consider a forward contract option which will allow us to lock in current rates of exchange ahead of the US elections. With so many potential pitfalls, getting the current rate could save you thousands on a transfer.

Equally, those buying US Dollars could have fresh opportunities as we approach the latter part of October. A limit order could be the perfect solution for you. We will buy your currency once it hits your desired exchange rate, removing much of the guesswork out of a volatile period. Our team of knowledgeable brokers are available today to answer any of your questions on these contract options.

Call our trading floor on 01494 725 353 to discuss any of the above.


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