The US Dollar maintains its 31 year high against Sterling but pay close attention to the Non-Farm payroll figures on Friday, could the US be heading into recession? Keep track of GBPUSD exchange rates.
GBPUSD exchange rates hit a 31 year low yesterday as sterling collapsed over a potential property crisis in the UK. This alarmed global investors with UK assets who immediately sought the safe haven of the US dollar which triggered the big move on the rate to 1.2797. The big question now is of course will this situation carry on further or will we see a rebound and some respite for USD buyers pound who are arguably one of the biggest losers from the Brexit decision.
Well last night the Federal Reserve released their latest Minutes for the meeting they had before the Brexit vote and even then they were in a ‘holding pattern’ leaving any decisions to hike or not ultimately to be determined by the Brexit vote and any fallout. Predictions on how many interest hikes will happen this year for the US have slipped from 4 in January, to 2 by April and it is appears will now be down to 1 or maybe even none. I can’t imagine after the Brexit vote they would be more inclined to hike rates.
I still believe the USD is overvalued in terms of the fact so far markets do not appear to be taking account of the prospect of a Trump Presidency, the dollar itself does not seem to be taking any stock of their election whatsoever. This must surely change as there are many parallels between Brexit and a Trump Presidency. Both present a change to the existing order and will (according to Trump’s pledges) have wide ranging economic consequences. I would expect election uncertainty to weigh on the Dollar as we approach the US election but who can say how weak sterling will be by then?
This Friday is the latest US Non-Farm Payroll data which will give us some insight into the US labour market. Assuming a poor number it might yet help USD buyers with pounds before we approach the UK Interest rate decision next week which is not expected to be good news for the pound. USD sellers for pounds are absolutely in the driving seat at present and whilst the next few weeks look rosy, nothing should ever be taken too much for granted on the currency markets. Selling dollars before the US election on this incredible spike seems to me like a good plan.
Those looking to buy Sterling with US Dollars may want to make the most of these historic highs, call us today on 01494 725 353 or email me here for a quote.
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