The Federal Reserve meeting minutes are due to be released today, this will be key insight for markets to learn about potential interest rate hikes on the horizon. The table below shows the difference in USD you could have achieved when buying £200,000.00 during the high and low points of the past week.

Currency Pair% ChangeDifference on £200,000
GBPUSD0.77%$2,179 USD
US economic data continues to impress, but what next?

Interest rate guidance key to Dollar strength

One of the key moments of this week in terms of economic data will be the Federal Reserve meeting minutes, released tonight at 7pm.

Investors and speculators alike will be reading through the minutes and looking for guidance on current plans for interest rate movements in the U.S for the rest of the year.

Of course these are liable to change as the year progresses, but with the markets moving on speculation as well as fact, the mere hint of further interest rate changes can impact a currency almost immediately.

At present, expectations are for a further two interest rate hikes this year and in recent reports there is a 38% chance of the U.S carrying out a 4th before the end of the trading year. The U.S also raised their growth forecasts recently so this does open the door for a further hike.

An interest rate hike is generally seen as positive for the currency concerned as it makes it more attractive to investors and should they aim at three rate hikes this year then this would more than likely increase the value of the Dollar, making it more expensive to buy.

USD Forecast – Trade wars and economic data

Trade wars with China still also of great importance

We are still seeing mixed messages released from both U.S and China regarding the current trade wars saga, and it does look like this may go on for a while yet.

Yesterday Chinese President Xi put out a word of caution about returning to the Cold war mentality, and essentially put out an olive branch to the U.S in a keynote address at the Boao forum, China’s answer to Davos.

This is an encouraging sign for trade around the globe too and despite all the hype it has presented the outcome could actually end up being positive for the global economy as a whole.

Xi proposed to increase Chinese imports, lower foreign ownership limits on manufacturing and to expand protection on intellectual property, all issues that Trump has raised. Although the signs are there that we may have a positive outcome to these trade wars on the horizon we are as always with Trump just one Tweet away from the situation changing once again.

Trump has many negatives around the way he has dealt with things but it does currently look like his regime has been a positive one for the U.S economy and the Dollar, I personally feel that unless there are major issues that erupt with China in the near term that trading levels for GBP/USD could easily drop back into the late 1.30s again in the near term.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.

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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.