With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The below table shows the difference in USD you would have achieved when buying £200,000.00 during the high and low points of the last month.
The USD has been under pressure recently and generally I expect this to continue. Both economic and political news has driven speculators and investors out of the USD. With the arrival of two significant tropical storms hitting the Americas it has resulted in outages and an expected drop in business activity. Politically, President Trump continues to make rather outlandish promises and has really struggled to make any significant progress in delivering his election campaign pledges. Lastly economic data has been driving the FED away from a potential rate hike that had almost been a certainty earlier in the year. All this has added to the recent gains for the GBPUSD pairing which has now climbed by over 3% in nearly 2 weeks. This gain means that a £200,000 USD purchase now secures over $8,000 more, highlighting the importance of talking to your broker here and the value of timing a trade.
Through this week we have seen the USD gain on news that an agreement has been made to avoid a government shut down in the near future. President Trump reached a deal with the Democrats over fellow Republican’s to pass an extension to the US debt ceiling until the 15th December. This averted a pending shut down while allowing for additional funding following Hurricane Harvey which resulted in 20% of US refining capacity being shut down which also pushed gasoline prices to a 2 year high in the US. A US government shut down however is not off the cards and I fully expect it to re-emerge around the end of the year remembering that President Trump's election campaign pledge was to build a border wall that is yet to be funded.
Moving forward I don’t expect this GBPUSD rally to continue in such a straight line. Only yesterday US jobless figures came out weaker than expected. US jobless claims have soared by 62,000 to a two year high following the surge in applications currently struck by the hard hitting hurricane Harvey.
Later today we have the Baker Hughes oil count which is likely to show a fall due to the storms hitting production, probably making the USD cheaper to buy still as we end the week.
On Wednesday of next week we have Production Price Index released for the US, this is expected to show a slight improvement meaning this may be the day for USD sellers to wait for. On Thursday there is Consumer Price Index data which is expected to show a climb and then a reverse once in fortunes probably on Friday with US Retail which is expected again to show a fall. Timing a transfer next week will be especially key for US traders.
Longer term I generally expect GBPUSD rates to fall as we move through the year. I expect the UK Brexit negotiations to add further weakness to the Pound. I also expect to see additional pressure on the FED to move forward with their plans to reduce their balance sheets which will be seen as positive for the USD. Watch out for any news on the potential change of leadership within the FED however within the next 6 weeks. Whether Janet Yellen will be re-elected or whether President Trump introduces a new leader who could be more open to less regulation will certainly impact the USD value.
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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