The US dollar has been coming under pressure as it appears as though optimism of a deal between the US and China is now fading. US Trade Negotiator Robert Lighthizer has said there that are still ‘major issues’ to be unresolved and this has caused the US dollar to weaken marginally.
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US Non-Farm Payroll data last Friday saw a big fall in new jobs created which means that the US Federal Reserve (Fed) are less likely to be raising interest rates in the near future, and with Fed Chair Jerome Powell being rather coy in his previous statement I think the Fed will not be raising interest rates as quickly as some may have previously expected.
US inflation data published earlier this week also fell to 1.5% year on year which is another indicator as to why the Fed will keep rates on hold. Typically if inflation rises then a Central Bank will look at increasing interest rates but if inflation falls then they would usually keep rates on hold or look at cutting them. Therefore, with inflation falling this is another reason for the small amount of pressure on the US dollar vs the pound.
Later on today the US will announce their latest unemployment data in the form of Initial Jobless Claims with the expectation for 225,000 so anything different could result in movement for the US dollar. We end the week with US Industrial Production data for February with expectation for 0.4% and this will provide further evidence as to how the US economy is currently performing.
Ultimately, GBPUSD exchange rates are likely to be dominated by what is happening with the ongoing Brexit negotiations so if you’re thinking about buying US dollars it may be worth taking advantage of these recent spikes with GBPUSD interbank exchange rates currently at their best level to buy US dollars with pounds in over two months.
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