How will a potential rate hike affect US Dollar exchange rates?

Pound to US Dollar exchange rates have improved slightly over the past couple of weeks, with the pair moving through 1.27 on the exchange. These levels are some of the best of the past month and with the US FED’s interest rate decision later this month, we may find Sterling’s advances are short lived. The Pound is likely under further pressure over the coming day, with the Supreme Court ruling over whether Article 50 must be ratified by MP’s before it can be triggered.

This is likely to build uncertainty, a currency biggest concern and with an upturn in US data over recent weeks as well, the US Dollar is likely to receive further market support.

Whilst investors had expected further rate hike this year, it is likely this month’s potential rise has been factored into current US Dollar exchange rates. As such, if the FED choose to keep the base rate on hold at 0.5% I would expect the US Dollar to lose value as a result and a break through 1.30 on Pound to US Dollar would be the likely outcome.

US President Elect Donald Trump has caused further controversy after igniting a war with China over his proposed plans to produce American products in the US. He has been speaking to the president of Taiwan, which has angered the Chinese and this has caused some tension between the pair.

As we know from his election campaign Trump is no stranger to controversy and with ate least four years at the helm of the world’s leading economic and political powerhouse, we could see increased volatility on USD exchange rates, as his proposal and extreme ideas are put into place.

For this reason I would not be prepared to gamble and would be monitoring the market closely ahead of this month’s prospective rate rise, with a view to protecting any short to medium-term USD currency exchanges as we head into 2017 and the Trump era.

Key economic data for the US

Looking at the key data for the US data this week and the US Dollar lost value yesterday following a worse than expected Services PMI figure. The 54.6% came out under market expectation and this helped solidify the Pound’s position above 1.27.

Today we have trade balance figures before employment data on Thursday, which will be monitored closely by investors and clients with a US Dollar requirement alike. These figures came out better than expected last month so any continuation of this could help boost the US Dollars value, which means it may be wise to secure your US Dollar transfer ahead of this date.

The US Dollar could weaken if the FED hold off on a rate hike in December, with Trump taking the Presidential role in January, further uncertainty around US Dollar rates could emerge. Call us today on 01494 725 353 or email me here if youd like to learn more on how the FEDs decision could impact your US Dollar requirement.


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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.