Future guidance on rates will be key

The US federal reserve have all but actually raised interest rates following a much better than expected US non-farm pay rolls report that highlighted the strength of the US economy since Trumps appointment as US president. The interest rate decision tomorrow could be a non-event, with one already being priced in after Friday's non-farm Payroll figures in my opinion. The key part for any clients is just how much will the US Dollar will strengthen? This could be down to how optimistic Janet Yellen is about future guidance and how many times the US will raise rates in 2017. It is no secret that President Trump wants faster economic growth, a promise many feel he is starting to live up to.

The Fed's Target is 3.0% by 2019, with three interest rates this year. If you are buying US Dollars, doing so before Wednesday may be imperative, my personal belief is that we could be set to see GBP/USD rates test the 1.20 barrier and possibly lower.

Raising rates, is this always a good thing?

However, this may not be a situation that ends well for the US economy in the longer term. US exports have started to drop in light of an expensive US Dollar. The Fed are moving a lot quicker than they wanted to and may have to increase rates further than forecasted. Reports are emerging that Trump and Janet Yellen are at loggerheads at the moment simply because Trump wants even faster economic growth whilst the Fed see this as potentially harmful for the US economy.

Fed officials have already pointed out that the US economy is growing in line with expectations, 0.3% above what is regarded as sensible. The Fed are set to advise of new projections Wednesday, however growth above the sustained rate can lead to a rapid increase in inflation, which in turn could lead to the Fed raising rates rapidly to play catch up.

If you have a US Dollar buying requirement and have concerns that making a transfer could become more expensive, why not speak with a member of our team on 01494 725 353 to alleviate the risk?

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