President Trump spent the last few days at the United Nations and focussed commentary on Iran and China. From a market driving factor his commentary has already had an impact on the price of Oil as he gave the impression additional sanctions would be put on Iran, therefore stretches supply and pushed prices up.  Egypt recently has decided that they will no longer buy oil from Iran. The reasoning why has widely been concluded as they would prefer to be in Iran’s bad books rather than the US. Oil prices do have an impact on commodity price currencies and net exports of oil like the Canadian Dollar and others.

Currency Pair% Change in 1 monthDifference on £200,000
GBPUSD3.8%$9,700
Trump at the UN weakens the USD – Oil and Trade

The commentary from Trump on China generally weakened the US in yesterday’s afternoon session as the President showed no signs of defusing the escalating trade tariffs with China. Trade talks have certainly been a major talking point when trying to look at the future value of the USD. Recently the US imposed a further $200 billion in tariffs meaning that when added with others already in place, half of all the products that China sells to the United States each year will be hit by American tariffs. 

This escalation has an impact globally as risk appetite drops and capital starts to flow out of emerging markets. The ECB recently suggested that the US would be the worst hit and in turn put more pressure on the FED with regards to future financial policy changes.

FED decision, rates hiked to 2.25%

Last night we had the latest update from the FED when they confirmed what had widely been expected and raised interest rates. This was the third hike this year and they signalled a further hike in December of this year.  In the future commentary however, there was an expectation given that rates may well not climb as much in the months ahead with trade wars mentioned as the reason. This actually resulted in the USD weakening.

Later today we have US GDP figures expected along with durable goods and jobless figures. These are all expected to show an expansion with GDP expected to show a 4.2% expansion for Q2 2018 confirmed. When compared to growth in the UK of just 1.2% over the same time you can understand why since the start of Q2 GBPUSD rates have dropped by almost 9%. 

Moving forward I generally expect the USD to continue to gain in value in the medium term I expect GBPUSD rates to reach a high of 1.32-1.33 as the top range. I also see a fall back below 1.30 as more a question of when rather than if as Brexit uncertainty is set to intensify in the coming 60 days.

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