Why Has the US Dollar strengthened?

Since the decision to hike the federal funds rate at the last meeting on December 14th we have seen the USD post strong gains against EUR, with EUR/USD falling from 1.066 - on 13th December - to lows of 1.036, a difference of €6,000 on a $200,000 transfer and post even greater gains against GBP with GBP/USD down from 1.272 - on 13th December – to the current low 1.22 levels, a difference of £6,500 on a $200,000 transfer. In my opinion the increased demand and consequential value of the USD is due to two main reasons. Firstly, the interest rate hike has caused a flurry of investors to purchase the USD and gain from the higher returns offered.

Secondly, as this volatile year draws to a close, numerous investors and traders are away from their desks. As such, many have decided to transfer their funds into safe-haven currencies such as the US Dollar and Swiss Franc, both of which have seen significant gains against many of their major counterparts over the last week.

Trump trade deals under a cloud of uncertainty

Donald Trump’s newly appointed trade chief, Wilbur Ross, may cause apprehension amongst Brexit ministers when it comes to hopes of possible swift and simple free trade deals with the UK.

The 79-year old investor, known for restructuring failed companies has endorsed the “Trump Trade Doctrine”, stipulating that any new trade deals must reduce the U.S. trade deficit, strengthen manufacturing and boost growth. This stance may be of concern for the UK, as since 2000 Britain has had a trade surplus with the U.S. in 15 of the last 16 years – the only trade deficit came in 2011 – and last year Britain had a trade surplus with the U.S. to the tune of $1.85bn.

Furthermore, whilst history has shown us British prime ministers tend to be among the first visitors to a newly occupied White House, Downing Street have been given no indication of when or even if Donald Trump wishes to receive Theresa May. With ties between the two looking to be tenuous at best, its uncertain whether the ‘simpler, swifter free trade deals’ the President-elect has alluded to recently will become a reality.

Any releases regarding US-UK trade deals during this thinner trading period could have significant effects not only the pair but also on EUR included cross rates. This shows the importance of keeping in touch with your personal experienced account manager here at Currencies.co.uk with any currency requirements you may have in order to make the most of your transfer.

Economic data releases

Tomorrow we see initial and continuing jobless claims released at 13:30pm. This shows the number of people who have started and continue to claim state unemployment insurance, providing an insight into the strength of the U.S. labour market.

If you have a US Dollar buying requirement, a number of factors point towards further strengthening of the Dollar which may weaken your buying position. Speak to one of our team today on on 01494 725 353 or email jms@currencies.co.uk to learn more.


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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.