This week sees some vital news on both economic and political fronts which could see some big movements on the US dollar. US Mid-term elections on Tuesday could easily see Donald Trump take a bruising, his approval rating is low and the Democrats are already polling very high.
According to the number of early votes being cast so far this is likely to be of a very high turnout, with Democrats receiving record funding. Whilst his position is not directly under threat, were the Republicans to lose control of the House of Representatives, it makes passing Trump’s legislative plans harder. This might see the US dollar weaker as political weakness weighs on investor’s high confidence.
The Fed are not expected to raise interest rates but we could see some hints as to future decisions, which would move the market. Recent economic news has supported the US dollar and raising interest rates, it makes a hike in December, the fourth of 2018, very likely.
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When all is going well in the economic stakes it is difficult to remember how fragile confidence has been. The global recession and difficult years of 2008-10 seems like a distant memory but market observers more familiar with the longer term will be very aware how quickly sentiments can change in the future.
Donald Trump has presided over some excellent economic data with the US economy experiencing strong growth, growing by 250k new jobs in the month of October. In putting the US Federal Reserve on track for their fourth hike of the year, all is very positive.
However, the pace of growth has declined, with GDP growing 3.5% versus 4.2% in Q2. If this good form does not continue into 2019, how will the US dollar react when that happens?
Any signs of falling growth and perhaps a threat to Trump’s dominant Republican party may well spell the beginning of the end for the recent positivity and could see a much weaker US dollar down the line.
The pound to US dollar rate has risen in recent weeks as the expectation for Brexit deal climbs. This week is a vital one for the pound as there is reported to be a growing expectation of a deal ready to be agreed on the UK’s exit terms.
GBP/USD rates have risen back over 1.30 but could very easily find themselves back below this level should the reports and expectations not turn out to be as positive as expected.
Either way there are plenty of events to move the rates this week so if you have a GBP/USD position buying or selling, I would suggest being prepared for a busy week and highlighting your position to our expert team sooner rather than later, so we can keep you updated on these important pieces of news.
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