Sterling has started to recover some ground against the USD but with rates hovering around 1.25, this still presents extremely attractive levels for US Dollar sellers. The Pound has strengthened over recent weeks, aligning with some of the uncertainty surrounding the UK’s Brexit being removed. UK Prime Minister Theresa May remains committed to triggering Article 50 of the Lisbon Treaty in March and with further details of the UK’s Brexit plan likely to become clearer over the coming weeks, the Pound could gain further market support against the US Dollar.
This feeling is even more poignant when you consider that President Trump has been voicing his concerns regarding the current strength of the USD. He feels the greenback is overvalued and as a result is having a negative effect on US exports, which is in turn hurting the US economy.
The fact he is even voicing these concerns means that the US Dollar is likely to and has come under pressure over recent days. This is despite the possibility of further rate hikes in the US over the coming months, which leads me to the conclusion that the USD is unlikely to return to the near 31 year highs against GBP we saw only recently anytime soon.
The USD had performed extremely well against the Pound for an extended period, in line with an impressive run of economic data and renewed business confidence following Trump’s Presidential appointment.
However, due to the new Presidents persistency for rocking the boat with his controversial statements, I would be extremely tempted to protect any upcoming USD currency transfers with one of our forward contracts, which allows you to lock in an exchange rate ahead of a future trade and remove the chance of future negative market movement.
Looking ahead and there is a host of inflation data out for the US today, which is expected to show a slight fall from previous. This along with head of the Fed Janet Yellen’s speech, certainly has the ability to cause additional market fluctuation for the US Dollar.
Whilst the slight drop in inflation has probably been priced into the current rates somewhat, any deviation is likely to cause GBP/USD rates to spike.
Wednesday sees the release of further inflation numbers and US Retail Sales figures, which are expected to come out at 0.1%, another fall on previous. Finally we have employment data on Thursday, so I expect a busy week for anyone with a GBP/USD currency requirement.
US Dollar sentiment may be turning sour as markets begin to question the stability of the Trump administration. If you have a US Dollar requirement now could be an excellent time to detail your needs to a knowledgeable broker. Call us on 01494 725 353 or email me here if you would like to talk to a specialist.
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