With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The below table shows the difference in USD you would have achieved when buying £200,000.00 during the high and low points of the past 3 weeks.

Currency Pair% ChangeDifference on £200,000
GBPUSD0.96%$2,600
US implement 25% trade tariffs this morning

Are the markets seeing through Trump’s tax plan?

Trump’s administration have long been pushing the extent to which last week’s historic tax reform will drive the US economy, and indeed the Dollar, to new heights since their victorious campaign last year.

With clear incentives for multinational companies to base their activity in the states, Trump’s team believe this should lead to an increase in international investment, resulting in new jobs and a boost for consumer spending which can only bode well for the US Dollar.

The markets seem to be a little sceptical with the US Dollar struggling to gain ground since the tax reforms were pushed through.

Given that US unemployment is hovering at decade highs the US is currently working at near full capacity, the counter argument is that the tax cuts can only really make a difference to higher earning households who normally are more inclined to save rather than spend, throwing the promises of exponential growth into doubt.

As a result, personally I am not quite convinced investors are buying into the idea that the tax reform truly bolsters the underlying value of the US economy, nor indeed will it tempt the Federal Reserve to take a more aggressive stance regarding its monetary policy. Dollar holders waiting for the tax reform to kick in before making a trade might be left disappointed.

The proof is in the pudding

Jobs and growth remain the clear concerns for the Federal Reserve next year and a slowdown in both regards could justify a more cautious stance regarding their monetary policy. Dollar holders will be hoping that the Fed follow through on their scheduled 3 rate hikes next year which will drastically set the greenback apart from its currency counterparts. Unfortunately economic data has been inconsistent throughout 2017 and given the lack of liquidity in the market at present this week’s releases could hold particular weight. Last week consumer spending data did accelerate and today’s jobless claim’s release looks set to fall which bodes well. I can certainly see the Dollar gaining value as the week goes on, so if you are looking to buy Dollars, it may pay to make a move sooner rather than later.

Thank you for reading today’s market report, I would greatly appreciate any feedback you have and would take pleasure in replying personally. If you have any queries feel free to get in touch on 01494 725 353 or email me here.

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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.