The Federal Reserve earlier this week defied Donald Trump’s suggestion of a 1% cut in interest rises following their 8 hikes in the past few years. Instead opting to hold tight on any further changes providing little indication as to what they might do. US Gross Domestic Product (GDP) for the first quarter grew at 3.2% which was itself 1% higher than the forecasted figure.

Currency Pair% Change (Month)Difference on £200,000
GBPUSD1.61%$4,140

This came as a surprise to many as in the past few months talks of a recession hitting soon were becoming ever more prevalent. However, despite considerably better than expected performance, the concerns surrounding the US economy still very much remain.

First quarter growth was boosted by an increase in business inventories, following a surge in industrial output. Analysts are keen to point out that whilst the inventories have risen there isn’t much proof of sales increasing, with businesses perhaps holding on to increased stock levels, this cycle has been continuing since the Summer last year.

Eventually there will have to be a cut in production levels whilst inventories are cleared, which in turn will make a dent into growth levels. Should we see this start to take effect in the next two quarters then expect to see the recession talks firmly remain a focus for America.

Despite the potential uncertainty for the US economy, the US dollar could remain around the current levels. Due to the safe-haven status of the currency, even if there was a recession, investors are likely to put their funds into the US dollar for safety. This process suggests that those looking to buy US dollars with the pound are more in need of sterling strength than troubles in the US.

US China trade war update

Major US data releases

Later today there is a flurry of data expected from midday onwards, with Average Hourly Earnings and Nonfarm Payrolls expected. Both are major indicators for US performance and have the capacity to cause instant marker movement. Several hours later in the mid-afternoon the ISM Non-Manufacturing PMI data will be released and is expected to show a slight improvement from the previous month.

If you do have an upcoming transfer in the near future, then make sure you’re in touch with your broker as they can alert you to a movement in your favour.

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