Potential US interest rate hike strengthens the US Dollar

GBP/USD rates have now fallen for 5 consecutive sessions and sits close to the lowest levels seen for many years just above 1.20. This fall in the GBP/USD pairing has been driven by both negativity with regards to the UK’s future as the action of officially triggering Article 50 gets closer, but also considerable USD strength. The ‘Trump effect’ on the US economy with his continual promise to provide some of the best business conditions in generations with an increase in spending while lowering taxes has resulted in the US Dollar gaining in value.

Indicators of US consumer confidence and economic activity beat expectations in February and an interest rate hike in the US now seems almost certain next week. As economic data continues to improve, I expect the US Dollar to continue this gain in value. Federal Reserve governor, Ms Brainard, said only last week that another US rate rise would be “appropriate soon” earlier this week.

It now seems a question of when will Pound to US Dollar exchange rates fall below 1.20 rather than if. The interest rate decision is Wednesday 15th and is an event that I believe could push GBP/USD below 1.20.

US Non-Farm payrolls – GBP/USD below 1.20?

This afternoon we have one of the most influential data releases with US non-farm payroll. This will give the market a clearer understanding of the US jobless market which is considered as one of the main driving factors for future interest rate hikes.

The expectation is that this release will show another improvement with 239k jobs created, an improvement from the 223k seen last month. Three out of the last five releases have beaten predictions so this event is a very much a market mover.

The US Dollar may strengthen considerably if the FED act in raising interest rates again, so speak with a member of our team on 01494 725 353 if you have an upcoming US Dollar buying or selling requirement.

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