Why is the US Dollar weakening?

The US Dollar is going through its roughest patch since the inauguration of new President Donald Trump. The Greenback is trading at its lowest level vs the Pound in almost a month and EUR/USD is at a 6-week high.

The fall in its value is being put down to a more dovish than expected Federal Reserve Bank last week. The Fed opted to raise interest rates in the middle of this month but outlined a further two interest rate hikes much to the disappointment of Dollar bulls.

Many had hoped for indications of three additional rate hikes this year, and I think had this of been the case we could’ve expected to see the GBP/USD rate put pressure on the key 1.20 support level.

Should I sell my Dollars?

With the US Dollar not being far from a 30-year high against the Pound, I think there is an argument for US Dollar sellers to take advantage of such attractive levels in terms of historical levels.

I think if we consider that the Brexit appears to be priced in to the Pounds current value and that Trump is keen to implement protectionist policies, I think there’s a chance the Pound could continue to climb from its current levels. I also think Sterling has strong support around the lower 1.20’s, having bounced off of this level a number of times over the past 9 months.

All eyes on the US this Thursday

Thursday is likely to be the busiest day for US Dollar exchange rates this week. US Fed Chairlady, Janet Yellen will be giving a speech starting around 12.30pm UK time. Expect any allusions to future monetary policy or economic performance to impact the markets especially after last week’s dovish tone from the Fed which resulted in the sell-off we’ve seen since.

There will then be Initial and Continuing Jobless claims figures released at 12.30pm followed by New Homes Data at 2pm. If you wish to be kept updated during this busy period don’t hesitate to inform me. I would suggest planning around this time in case of increased volatility.

For more information or future forecasts for the US Dollar, feel free to get in touch with me at jxw@currencies.co.uk. You can also set up a free account here and one of our brokers will be in touch with you.

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