Getting the best exchange rate can be achieved by understanding what is driving rates and the service of a specialist currency broker. Below are movements on Wednesday affecting USD rates when buying £200,000:
|Currency Pair||% Change||Difference on £200,000|
Overnight the US central bank, the Federal Reserve have raised their base interest rate in a move widely anticipated by markets. The general outcome from a higher interest rate is to strengthen the currency concerned however, in this case the US dollar actually weakened losing almost 1% from some of its better points against the Pound. This is largely due to the tone of the FOMC (Federal Open Market Committee) who make up the members of the Fed voting on the hikes.
In their commentary surrounding the path of future rate hikes in 2018, the key phrase was ‘gradual’ which means further hikes are expected in 2018, but perhaps in not as aggressive a manner as the market was expecting.
The overall belief is that we could see another 3 gradual hikes in 2018, the decision will ultimately be based on the economic data and FOMC view of the US economy. With economic data strong in terms of economic growth and employment the case for continuing to hike is strong, particularly if Donald Trump’s tax plans give the economy a shot in the arm. Other factors of importance will be the new Federal Reserve chairman, Jerome Powell who will take office in early February. His nomination by Trump last month is seen as good for business and he will probably be looking to carry on the pace of hikes as per current chair, Janet Yellen.
GBPUSD rates have risen to the fresh highs of this week following the decision last night but there are now a series of challenges for any US dollar buyers with pounds. This morning’s UK retail sales, the UK interest rate decision at 12.00 gives way to US retail sales at 13.30, offering up what could be a choppy day on GBPUSD. The UK data might see the pound rise a little higher but Retail Sales can be very unpredictable so if you wish to take the risk out of the situation, speak to your account manager earlier. Buying USD rates with pound are close to the best since the EU vote, US dollar sellers for pounds are also still enjoying the near 30 years highs on offer.
Overall a slightly stronger Pound against the US dollar would not be surprising, particularly given the EU summit which could help the Pound rise against all currencies if the deal is struck and progress is made. Speak to your account manager today about all of your options and the market to make the most of any US dollar transfers.
US Retail Sales is due out today and I expect there to be a small increase from the previous month which could cause US dollar strength.
US Services Purchase Manager Index (PMI) is out later today. This gives an indication as to the health of the services sector in the US. The service sector makes up a large amount of US GDP so is well worth keeping any eye on.
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