Yesterday the US Dollar weakened against the Pound, hitting its lowest level in 2 weeks to just above 1.32. This followed comments from EU Brexit Negotiator Michel Barnier that the terms of a Brexit deal could be reached as early as next week. This boosted investor confidence in the Pound, and provided an excellent opportunity for clients buying US Dollars with Sterling to capitalise on.

Currency Pair% Change in 1 monthDifference on £200,000

The US Dollar also weakened against a basket of other currencies including the Euro, after the release of Producer Price Index (measuring the average change in prices received by producers for their products), which rose by 0.2% in September compared to the previous month, in line with expectation. However the annualised rate fell to 2.6%, missing expectations of 2.8%.

Continuing tensions between the US and China likely to impact USD

US/China trade war intensifies

The ongoing trade war between the US and China continues to intensify, and in another bid to fight back at China, it was announced yesterday that the Trump administration will start to block foreign investment in industries such as technology and telecommunications. They stated that the US will begin implementing greater authority to block Chinese transactions which pose a threat to US security, preventing China from accessing new wireless technologies such as 5G.

So far the US has implemented trade tariffs of $250 billion of Chinese imports, and this figure has so far been matched by China on US imports.

Trump and FED in disagreement over Interest Rate hikes

President Donald Trump also spoke yesterday and stated that the Federal Reserve are raising interest rates too quickly, and that he is not happy with the approach to monetary policy, but that he would not put any pressure on the FED to change its stance. Similar commentary was made by the President in July and August which caused the US Dollar to fall in value, so it is likely that yesterday’s weakness can be partly attributed to these comments. The Federal Reserve has hiked US interest rates 8 times since 2015 and is expected to continue to hike until the rate reaches 3.25% by the end of 2019.

Inflation data in the form of Consumer Price Index will be released at 1.30pm this afternoon, and is expected to show a rise from 2.2% to 2.3%. This could help the US Dollar to regain some lost ground and create an opportunity for US Dollar sellers once again. Get in touch today so that we can help you to capitalise on US Dollar rate swings. 

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