US President Donald Trump has been back in the spotlight this week heavily criticizing Germany, Japan and China. The President has outlined the three countries as devaluing their own currencies in a bid to harm the US economy and in particular American companies and consumers. Furthermore he went on to exclaim he feels the US dollar is overvalued because of the antics from the three leading nations. For the benefit of the reader a common reason why countries may wish to devalue their own currency is to boost exports which in turn shrinks their own trade deficits.
Back in 2008 financial leaders from the top 20 economies agreed they would not target exchange rates to benefit their own economies. Donald Trump’s controversial comments has led to a sell off of US dollars and therefore a devaluation against its major counterparts. Overall it just shows Donald Trump has a complete disregard to the 2008 agreement and this trend could continue in the months to come.
With the President making it clear he feels the US dollar is overvalued I wouldn’t be surprised to see further controversial comments which could make headline news and as a result the US dollar could continue to fall in value. For US dollar sellers the fantastic rates for buying sterling could be coming to an end under Trump's watch.
As expected the US Federal Reserve left interest rates unchanged at 0.75%. The central bank gave no clear indication to when they believe a rate hike will occur but did state consumer and business confidence had improved. It seems as if the FED need further clarity on Donald Trumps economic plans. Before Trump was elected President he promised tax cuts, increased spending and to renegotiate trade relationships. However since his appointment no clear direction has been given.
Last week Chairlady of the FED Janet Yellen warned the US, that stalling on raising interest rates could have a detrimental impact on the US economy, for that reason I expect the US to raise towards the end of the summer. However the three hikes that were predicted throughout 2017 seem optimistic. I wouldn’t be surprised to see the Fed only raise interest rates once this year the price of buying US dollar with sterling could become cheaper throughout the year regardless of Brexit.
Trump remains an unknown to the markets and given how cautious the FEDs Chairlady is, its quite plausible the FED will hold off on further rate hikes for the time being. If you have a US Dollar requirement you may want to get in touch with your broker to understand how this could impact you. Call us on 01494 725 353 or email me here.
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