FED Beige Book contributes to US Dollar strength

The US Dollar performed well throughout yesterday following from a host of positive US data released. Personal Consumption Expenditure, Personal Income and Employment data all came in better than the previous readings, showing just how strong the overall US economy seems to be at present. In addition to this, the Federal Reserve’s Beige Book report, a collection of information on regional economic conditions within the US, had a very positive tone too.

The FED stated that 7 out of 12 districts had noted moderate growth since August, with a further 3 showing slight growth.

With this in mind, the prospect of an Interest Rate rise in the US is looking ever more likely. Economists are predicting a rise from 0.5% to 0.75%, a hike which has been eagerly anticipated since last December when the FED announced they would raise rates 4 times throughout the course of the year. FED Governor Jerome Powell has also backed this by claiming that the case for a hike has clearly strengthened since their last meeting and that the data all points towards a healthy, growing economy.

What will happen to exchange rates if the FED hike rates?

As the most traded currency pairing is EUR/USD, if the Interest rate is hiked I would expect investors to flock to the USD for greater returns on investment, which could cause Euro weakness. However before this key date, we have the Supreme Court ruling on 5th December, where it will be decided whether or not Parliament will have a say on how Brexit negotiations will play out.

This afternoon will provide another opportunity for the US Dollar to strengthen, if jobless claims, manufacturing data and construction spending data impress the markets.

Considering the many factors which could cause volatility for Pound to US Dollar exchange rates, if you have a pending property purchase or business transfer to make it may be sensible to detail your requirements to your Broker here who will help you to time this as best as possible.

Clients who are looking to buy the US Dollar in the coming weeks could benefit from discussing your requirements through with a knowledgeable broker. A US interest rate hike in December could make a transfer more expensive, so get in touch with our team today on 01494 725 353 or email me here if youd like more information.


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