This US Dollar forecast will address the factors that could have an effect on exchange rates over the coming weeks. The table below looks at the difference between the rate you would have acheived when purchasing USD at the low and high levels last Friday.
|Currency Pair||% Change||Difference on £200,000|
The US Federal Reserve have raised the US key interest rate by 0.25%. From 1% to 1.25%. Janet Yellen the Head of the Federal Reserve had stated we could see as many as four hikes this year, this is the second. I would be surprised to see growth levels rise enough to warrant a third.
These are the highest levels since interest rates were cut after the Lehman Brothers collapse in 2008. Justification for the hike was down to US economic growth and job market strength.
Yellen stated “Our decision reflects the progress the economy has made and is expected to make.”
There was little movement on GBP/USD following the hike as it was highly anticipated. The market had already factored in the FED’s move. The exchange moves on rumour as well as fact, it is when the unexpected occurs you see large swings in currency value. Despite Yellen’s statement, US data has been mixed, inflation is an issue which could prevent a third hike this year.
Last week’s US consumer price index data showed the biggest fall in over a year. Current inflation levels in the US is below the FED’s 2% target. Yellen has put this down to falls in specific areas such as mobile phones and pharmaceuticals and has the view over time this will even out. I consider this to be a rather brave prediction. The FED also has the small problem of bringing down the current USD 4.2 trillion form QE.
With all the uncertainty surrounding politics and Brexit negotiations in the UK I think it will be hard for GBP/USD to breach 1.30 short term.
Manufacturing and services purchase manager index (PMI) data is released on Friday and will give an indication of health in these specific areas. These both have the ability to alter USD value, particularly manufacturing. Keep an eye on Home sales change which is released shortly after the PMI data this could also cause a swing for the green back.
Thank you for reading my USD currency report, if you have any questions about an upcoming currency transfer I'd be more than happy to assist. Feel free to get in touch here.
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