This US Dollar report will examine the factors that could affect exchange rates in the coming weeks to help you stay informed if you need to make a currency transfer. The table below shows the difference you would have received in USD when buying £200,000 at the high compared to the low levels for the past week.
|Currency Pair||% Change||Difference on £200,000|
The US dollar is much softer going into this week after Hurricane Harvey in Houston, Texas caused widespread destruction. With many Oil Refineries closed and potential damages estimated around $40bn, there is great financial, as well as human cost to this event. Janet Yellen spoke at the Jackson Hole Symposium on Friday but failed to discuss monetary policy as many had predicted. As Chairlady of the Federal Reserve markets were expecting some hints as to when the Fed would next raise interest rates, they were left disappointed and the US dollar softened. With Hurricane Harvey far from over and affecting areas that are vital to the US Oil and Gas Industry (many refineries are closed), this event look likely to pile further pressure on the US economy.
Donald Trump has responded well to the crisis offering financial support although the US Government has been accused of using the event to bury ‘bad news’ reinstating a transgender military ban that had been unpopular. As well as the Hurricane and concerns over the Fed other events that could move the US dollar this week include US GDP (Gross Domestic Product) on Thursday and Friday Unemployment report and NFP (Non-Farm Payroll).
A key driver for the US dollar remains the prospect of when the next interest rate hike will be. The US dollar has been slightly weaker in recent weeks as markets question the likelihood of the Fed raising their base rate.
US GDP is expected to be firm at 1% and for the NFP expectations are for 180k new jobs to be created following last month’s surprise 209k. This will be carefully watched by investors and owing to the volatility of the release could see a busy end to the week for the US dollar.
As if all of this wasn’t enough North Korea has fired a ballistic missile over Japan. Whilst typically the US dollar would strengthen under such threats so far there has not been any major display of USD strength. I believe the reason for this two-fold, first recent escalation with North Korea ultimately died down and two, markets are more concerned with the Fed and what steps they will take next given Hurricane Harvey and Yellen’s lack of clarity on Friday.
If the jobs and GDP data fail to live up to expectation GBPUSD could easily rise back over 1.30, what is more revealing on the latest USD behaviour is EURUSD which has jumped to near 1.20 owing to USD weakness. Whilst North Korea could spook markets the reality of Hurricane Harvey is outweighing this threat and I expect the US dollar to remain on the weaker side for this week.
There is also the looming Government shutdown if Congress cannot agree on the latest debt ceiling talks which Trump wants to use to fund ‘the wall’. The deadline is the 1st October so expect to hear more about this in the coming weeks, in 2013 the shutdown saw the US dollar much weaker and this could easily happen again.
If you have any US dollar transfers please make sure you highlight your positon and keep us updated as this could be a very volatile week indeed for the US dollar.
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