This week we have multiple speeches from Fed representatives, investors will be looking for indications of the predicted 3 interest rates this year. This USD report will look at how potential interest rates are affecting the US Dollar currently, and how this could change in the coming months. The table below shows the difference in USD you could have achieved when buying £200,000.00 during the high and low points during trading yesterday.
|Currency Pair||% Change||Difference on £200,000|
A key mover in US Dollar value is the Interest Rate Forecast. There has been rumoured to be as many as three potential rate hikes in 2018.
Investors wait with baited breath in anticipation of Federal Reserve members giving a hint to future monetary policy changes.
Personally I would be surprised to see as many as two if you consider recent history despite the recent change in Fed chair from Yellen to Jerome Powell.
It is being swept under the carpet that a rapid rate in hikes has the potential to cause serious problems in the US economy.
The most dramatic effect of a steep rise in rates would be the increase in pressure on US tax payers to repay current debt.
Quantitative Easing has been one of the major factors of US debt increasing to nearly USD 21 trillion from 12 trillion in 2010. No doubt it will not be addressed and played down.
Despite many believing the US Dollar will gain value against Sterling during 2018 I am not so convinced. Market trend shows a gradual fall in USD value. There was the significant rise in the green back's value following the vote to leave the EU, with the Dollar eventually peaking at 1.20 in January. Since then we have seen the GBP/USD rate rise as high as 1.42.
I think there will be less rate hikes from the Federal Reserve than expected. There has also been several Fed members who have stated they are unconcerned with the weak value of the Dollar, justifying this by saying the weak dollar will increase exports.
If I was selling USD to buy GBP I would take advantage of current levels.
Keep in mind Sterling is currently chronically undervalued due to Brexit uncertainty and I think the Pound could continue to make gains against the US Dollar.
If you have a trade to perform involving the US Dollar it would be wise to listen to the speeches due from Federal Reserve representatives this week. Raphael Bostic, CEO of the Federal Reserve Bank of Atlanta is due to speak this afternoon and if he gives any indication as to Interest Rate outlook we could see a movement in the Dollar.
Later in the afternoon we hear William Dudley’s views. Dudley is the CEO of the Federal Reserve Bank of New York and on Friday we will hear from CEO of the Federal Reserve Bank of Chicago, Charles Evans. Each of which could influence the Green Backs value.
These speeches could be of particular importance as previous Fed members have stated there is a lack of concern for US Dollar weakness as it could be perceived to encourage exports.
US Nonfarm Payrolls is released every first Friday of the month and measures employment excluding the agricultural sector. It is historically hard to predict and so if you wish to avoid it’s unpredictability trade before this release.
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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