Yesterday was judgement day for the dollar. Its status as a safe haven for investors was put to the test as America’s Brexit loomed, following the surprise presidential victory of Donald Trump. Its backlash however was far more muted than most had anticipated. As the polls came in, investors reacted in predictable fashion, shifting their commitments away from the USD and into more stable stocks and currencies, seeing the price of gold for example initially jump by 5%.
However this knee jerk reaction was tamed following the President to be’s acceptance speech.
Trump’s call for unity seemed to have stabilised the trust around the dollar and sparked the revival of the green back, eventually re-establishing its towering highs over the Euro and Pound. Rising by 3.3% and 1.4% respectively from the start of the day.
The question is, will this stability last? If so, for how long?
Given the dollar’s fate will only be in Mr Trump’s hands as of the 20th of January (Inauguration date) we could be faced with a similar waiting game of uncertainty to the one being played out by the UK waiting for article 50 to be triggered.
The emotions have been flying high over the course of this election and so it would be easy to forget the importance of the upcoming interest rate decision for the Federal reserve taking place in December.
The FED have expressed their distance from any political influence so logically their decision should not be affected by Trump’s election.
If the plan is to hike in December, I expect to see the US Dollar strengthen further given most other central banks are not running such a tight monetary policy at this moment in time.Investors will take security in this and the demand in the Greenback will stay strong.
The team of traders here at currencies.co.uk will be keeping a close eye on the build up to this over the next few weeks and will happily share their knowledge to help you make an informed decision.
Looking long-term, it is very hard to say whether the US Dollar will continue to enjoy it’s current strength. Trump’s promise to reinvest $500 billion dollars into infrastructure, slash taxes on businesses and slap higher taxes on imported goods will certainly add to economic growth short term but will create great uncertainty for the future given there will more than likely be a fight back from the US’ trading counterparts (China in particular) making it far more expensive to import essential goods for the economy. Thus, at risk of adding to the country’s deficit long term, there could be some rocky times ahead for the dollar.
So amidst all this uncertainty, it may pay US Dollar sellers to make the most of the current fantastic levels and organise a forward contract with your broker, limiting your exposure to any future volatility.
Today sees the initial and continuing Jobless claims stats released at 1:30 UK time which may produce short term buying opportunities for US Dollar Buyers. Once again, we’ll be on the pulse so please do not hesitate to get in touch.
Thank you for reading my US Dollar report, if you have any questions regarding a Trump victory and the potential implications on your buying or selling USD requirement, call our team today 01494 725 353 or email me here.
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