All signs seem to be pointing to another volatile week on US dollar exchange rates. With the pound comfortably breaking through the key 1.30 mark against the greenback in the build up to Tuesday’s Brexit plan B vote, there still seems to be plenty of scope for further sterling strength, with major market drivers stateside holding the potential to devalue the us dollar in the coming days.
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Wednesday’s Federal Reserve interest rate decision will likely be taking center stage. The general consensus certainly seems to be that global trade conditions currently would not justify yet another interest rate hike and so the markets are expecting levels to remain on hold. Importantly however, the Fed Chair Jerome Powell’s tone has gradually been making investor’s wary and it could be argued that the underlying faith in the US dollar is beginning to waver.
It will be interesting to see how the pending homes sales release comes out just prior the Fed’s meeting. If last week’s surprisingly poor existing homes sales levels are anything to go by, the markets may well have yet more reason for caution and it could force Powell to dampen market expectations further. If this proves to be the case, Dollar weakness could be expected.
If you are in the market for US dollars, it may pay to plan ahead of this event so you are in the best position to capitalize on a shift in your favor.
Evidently, over the last couple of weeks the ball park has changed on cable exchange rates. Whilst the prospect of a Brexit no-deal, for the time being, seems to be rapidly fading, the US Government only return today after the record breaking 35-day partial shutdown.
I expect discussions over the Mexican wall to be the main driver for political uncertainty and will likely anchor greenback exchange rates for the foreseeable.
Personally, unless we see a complete U Turn for the UK Government, I can’t see the Greenback pushing back below 1.30 against the pound before the 15th of February when the shutdown is due to resume and Trump’s standoff with the democrats continues.
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