Trump has stated that a raising tariffs on imported steel and alumium is something his administration want to do to drive US goods. The concern surrounding this seems to be US trade partnerships being affected if Trump goes through with the changes. The table below shows the difference in USD you could have achieved when buying £200,000.00 during the high and low points during the past 5 months.
|Currency Pair||% Change||Difference on £200,000|
The Pound continued its struggle against the Dollar during yesterday’s trading as better than expected inflation and unemployment data further justified US Fed Chair Jerome Powell’s views that US interest rates may need to raised even more than that was initially hinted back at the December meeting.
The Personal consumption expenditure release, a favourite for the Federal Reserve when tracking inflation, came out at an impressive 0.4% increase, suggesting that optimism amongst US consumer’s remains strong which should result in sustained economic growth over the months ahead. Furthermore, initial jobless claims came out 16k better than the initial consensus at 210k. Evidently with the US jobs market currently running at near full employment, the Federal Reserve will be running out of justifications for pulling out of the potential 4 interest rate hikes this year.
Yesterday US stocks took a tumble after president Trump stated his administration are committed to raising tariffs on imported steel and aluminium (to 25% and 10% respectively) in a bid to drive US goods on the domestic market. Stocks for the major US industrial players rose but both the S&P 500 and the Dow Jones both closed the day nearly 2% lower across the board.
Although driving local competitiveness is good for US jobs and growth within the industrial sector, the markets main concern clearly is the retaliation from the US’ trade partners with a real threat of a trade war with China a distinct possibility. The EU also stated that they would have to review their tariffs should Trump follow through.
Trump has already burnt a number of the US’ north American bridges by bringing the NAFTA agreement into doubt. By weakening the ties with other major trade partners, Trump could potentially be hindering potential growth long term. The dollar could weaken as a result.
As with the majority of its major currency counterparts, Sterling’s value against the dollar near term will no doubt be dictated by Theresa May’s speech today. If the Prime minister can provide the clarity the markets are looking for then there is every chance Sterling could recover the losses it has suffered this week and break back through 1.40 level.
However, Services and PMI data are due to be released early on Monday morning. If the optimism from the consumers is shared by the managers of the leading companies of the US industrial sector then there is every chance sterling’s woes could return just as quickly.
It you are looking to buy dollars with pounds it may pay to get in touch with your account manager before the PM speaks today, so he can help you capitalise on market movement in your favour and more importantly protect your exposure should the markets take a turn for the worse.
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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