The US dollar has once again improved against the pound trading at its best level since the start of 2019. US President Donald Trump has announced tariffs on all goods coming from Mexico and wants illegal immigration to stop.
|Currency Pair||% Change (Month)||Difference on £200,000|
In a tweet at the end of last week Trump claimed that a 5% tariff would be put in place and will continue to go up ‘until the illegal immigration problem is remedied.’ Trump has campaigned for money to build a wall between the two countries but has failed to get the funds that he has previously requested. In a statement from the White House Trump has said that tariffs will rise by 5% until October when the rate hits 25%.
This has caused stock indices across the globe to fall and this has helped to strengthen the US dollar against both the euro and the pound. In times of geopolitical uncertainty the dollar tends to be used as a safe haven currency and this is clearly being demonstrated at the moment as the GBP/USD rate continues to move in a downwards direction.
With the US-China trade war still rumbling on Trump does not appear to have too much appetite in changing his approach and this is keeping the dollar very strong at the moment.
The US dollar has also benefitted from positive consumer spending data on Friday. The US Federal Reserve has hinted that it may be ready to look at a shift in their monetary policy soon but as this data was so strong any change may not be coming as soon as previously expected.
US GDP was downgraded to 3.1% last week but still remains very high so the combination of strong consumer spending data has kept the dollar strong against the pound.
We end the week with US Non-Farm Payroll data on Friday afternoon as well as the latest US unemployment data.
The expectation is for unemployment to rise from 3.6% to 3.7% so if this happens could this be the catalyst for a bit of dollar weakness to end the week?
If unemployment does rise this could provide the US Federal Reserve with support to look at cutting interest rates so this data release could provide the pound with a brief respite against the US dollar.
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