Trade wars between the US and China may start to have a direct impact on USD rates, a recent Reuters poll has suggested. Today's US Dollar report discusses how this could affect the US Dollar; the below table shows the difference in US Dollars you could have achieved when buying £200,000.00 during the high and low points of the past month.

Currency Pair% ChangeDifference on £200,000
GBPUSD2.7%$7,650 USD

US Dollar gains after poor UK Inflation data

The US Dollar strengthened significantly against the Pound yesterday as UK Inflation data for March was released worse than the previous month, at the slowest pace in a year. This meant that GBP/USD fell from 1.431 to 1.417 in the space of just a few hours yesterday morning, and the Pound struggled to regain much of the lost ground throughout the afternoon.

However, the ongoing trade wars between China and the US has meant that many economists are now predicting that the US economy will suffer as a direct result. There had been some positive feeling surrounding the US economy, specifically growth from the huge tax cuts which was passed through Congress just a few months ago, however a Reuters poll taken from 100 economists suggests that recent events will not allow for sustained economic growth.

Mixed US housing data

The poll showed that growth this year would average at 2.8%, and that this could fall to 2.4% in 2019, and 50% of economists are expecting trade wars with China to be the most damaging for the US economy.

The next US Federal Reserve Interest Rate decision will take place on 2nd May, and after hiking rates at their last meeting in March for the 6th time since 2015, it is widely expected for rates to be kept on hold. However the same poll expects the FED to raise rates another three times this year, taking the Interest Rate to 2.25-2.5% by the end of 2018.

Although these are merely economist’s predictions, it does highlight the strength of the US economy and we could see US Dollar strengthen significantly in the longer term if the FED were to follow the above plan.

With so much current political uncertainty, this path could look very different depending on Donald Trump’s next moves, and it will be interesting to see how the FED will react to this over the coming months.

Where next for GBP/USD rates?

UK Retail Sales figures released this morning are likely to cause volatility on GBP/USD rates as a large drop from February’s reading to March is expected, and could provide another great opportunity for clients holding US Dollars. Then this afternoon Continuing and Initial Jobless Claims data for the US will provide an insight into the labour market, and the Baker Hughes Oil Rig count on Friday afternoon. Get in touch with us today to plan around these events.

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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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.