Supreme Court takes shine of Pound to US Dollar exchange rates

Following the Supreme Courts decision yesterday to uphold the legal position we saw Pound to US Dollar exchange rates fall. GBP/USD rates fell 0.6% lower after the result whereas yesterday morning GBP/USD rates where at a 5 week HIGH.

US Business settlement improves

Yesterday afternoon we had US Manufacturing data which showed an improvement.

Business confidence is currently at its strongest level since March 2015 and most can be attributed to the ‘US first’ policy by President Trump. One of his first acts as President was to pull away from the negotiations of a Trans-Pacific partnership deal President Obama had worked hard to put together.

Even though this was really a symbolic gesture as no deal had actually been signed, his stance has already had far reaching impacts in Business globally. Toyota, Ford, Amazon and other large corporations have all stepped away from plans to build factories outside of the US and have instead suggested they will increase investment within the US. Amazon for one is expected to hire an additional 100,000 staff within the US within the next 12 months. This has all helped to create a positive business settlement within the US which many expect to continue as President Trump signs more executive orders in his new position.

Big Mac index confirms the US Dollar is overvalued

The dollar’s value has risen sharply over the last few months. The Economist’s Big Mac Index which is a light hearted gauge of currency valuations. It compares the price of a Big Mac around the world. It shows that the dollar is overvalued in 37 of the 42 countries (the exceptions are Switzerland, Norway, Sweden, Venezuela and Brazil).

When will the US raise interest rates?

It seems increasingly likely that the US will raise interest rates through the course of 2017. Especially as a result of President Trumps plans to increase spending and lower taxes.

The first hike is widely expected to be in the second half of 2017 with the latest forecasts suggesting a 74% chance of a hike at the June meeting. Something to be aware of if you have an on-going USD exposure as higher interest rates normally strengthens the currency in questions and therefore makes it more expensive to buy.

US GDP figures and Trump-May meeting expected to help GBP/USD

Friday is expected to be the biggest day for the GBP/USD this week with GDP figures and Durable goods expected to be released. This is also when we have the Trump – May meeting.

US data is expected to show some contractions from 3.3% down to 2.2%, but I expect the meeting between Trump and May to be the main driving point for GBP/USD. It seems likely that with the new inaugurated President there will be a more ‘business friendly’ stance which will likely push the Pound’s value up.

I would not be surprised if we see GBP/USD levels up at a 5 week high as the week comes to an end. Meaning anyone with USD to buy may want to wait for this event. On the other hand, anyone with US Dollars to sell may wish to take advantage of these current levels before this meeting takes place.

Pound to US Dollar exchange rates have been om the rise since Trump's inauguration, and may be set to continue if markets continue to show concerns for Trumps economic plans. Speak to one of our team to find out how this could affect your buying or selling requirement on 01494 725 353. Alternatively, email me here and Ill be happy to reply personally.

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