GBPUSD rates find themselves in a very important range, sitting between 1.27-1.305. Both are key levels of resistance and once broken could set the trend for the next large movement for the GBPUSD pairing. Both these levels have been touched over the last three weeks resulting in a well-timed transfer into USD giving clients an extra $7,000 on each £200,000 transfer. The reason for these swings have been the changing view on Brexit in the UK but also the political and economic environment in the US. More on these factors and upcoming data releases for USD in today's report. The table below displays the range of cable rates throughout the past month, showing the difference in return you could have achieved when selling £200,000.00 during the high and low points of that period.
|Currency Pair||% Change||Difference on £200,000|
Trade talks have certainly been a major talking point and are very likely to remain so going forward. Over the summer the trade conversations with China intensified. The US imposed a 25% tariff on $50bn worth of Chinese imports which was matched quickly. This rising tension over trade is changing global risk appetites and have resulted in an increasing amount of capital flowing out of emerging markets and has weakening global growth prospects.
The IMF recently estimated that trade tariffs and other measures implemented recently could reduce global GDP by as much as 0.5% by 2020.
This protectionism from the US leadership seems to have only dented rather than changed the impressive growth forecasts for the US. It also has increased the popularity of the US President domestically. The US economy is growing at a quick pace and has been putting pressure on the FED to potentially raise interest rates further. I expect this potential change in returns for USD holders to be one of the main driving factors for the USD's value going forward. It was suggested that we could see the FED raise interest rates a further two times this year and if confirmed I personally think we could well see GBPUSD rates down towards 1.25 rather than up at 1.35 as we end the year.
In the nearer term the Dollar’s value will be driven by economic data as it gives clarity on the performance of US business. Yesterday we had key Factory orders released which showed a contraction compared to the last month. This was put down to seasonal impacts with factories closing for the summer month of August, it is probably a short-term impact on the GBPUSD and makes it cheaper to buy this morning.
Total focus today will be on key unemployment data due this afternoon. The first Friday of the month brings with it traditionally the most important data set which is Non-Farm Payroll figures and the Unemployment figures in the US. The jobless market is running at 3.9% and is expected to drop further to 3.8% and job creation in the non-agricultural is expected to have increased by nearly 30,000 since last month. This, if confirmed would put US unemployment at an 18-year low. Both of these are normally very USD positive. In real terms most expect the GBPUSD pairing to fall lower to end the week.
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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