Last week we saw the Pound end the week over a cent higher against the greenback than where it started. GBPUSD rates climbed from a near 8 month low of 1.31 up to nearly 1.33. The USD report below discusses the recent data releases and ongoing political unrest caused by Trump's trade tariffs. The table below shows the range of exchange rates available during the past month when selling £200,000.00.
|Currency Pair||% Change||Difference on £200,000|
This came from some upbeat data from the UK with many areas of the economy posting gains and the UK government forming a 'united' front on how they want to enter the next stages of negotiations on Brexit. This new plan, which was concluded on Friday, was the third attempt and hints have already suggested that the German Chancellor has already not given her support.
US data was fairly light last week with jobless figures the only release of note. This came out on Friday afternoon and showed that in June 213k jobs were created, this exceeded the 195k expected which continuing to project the view of 'full employment' within the US.
China has again accused US President Trump of launching 'the largest trade war in economic history.' This was after further tariffs were introduced putting the total to $34bn or £25.5bn. It has now been estimated that the tariffs will knock around 0.1-0.2% off each other’s economy this year which represents about $60bn to the US.
It seems that this 'trade war' will continue to grow which in turn could put pressure on stocks, shares and currencies as the impacts are felt. For example in China over a period of 11 days recently stocks fell by over 10%. The impact of a trade war has been well documented historically with most concluding that any gains are seen months or years later, initially only negativity domestically has been felt. This is a topic to watch if you have any USD exposure in the coming months.
The next data focus for the US is Inflation data which is due for release on Thursday. These are expected to show an improvement and as a result will probably return the GBPUSD pairing to the negative direction that has become so familiar over the last 3 months. The cost of buying USD has now dropped by over 10 cents over the last 90 days.
Generally I expect GBP USD rates to trend negative for the remainder of July with any movement up to be seen as a short term opportunity rather than a long term change in trend. The interest rate differential between the UK and the US currently sits at 1.25%, the largest in over 20 years, and is expected to widen further through 2018. This in turn I see putting more downward pressure on the cost of buying USD with Pounds.
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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