Now the concept of Brexit begins to sink in, what impact will this have longer term on the global markets and the US? What impact will it have on the FEDs decision to hike rates?
The US Dollar has once again shown us how economic and political turmoil elsewhere attracts investment to safe haven currencies, leading to a 3 decade high against Sterling. On the surface this is great for our clients trading US Dollars for Sterling but poses a number of risks in the global markets.
During yesterday’s trading day Sterling clawed back over 2-cents against the US Dollar, is this trend likely to continue?
Prior to the Referendum, markets were pricing in a FED hike early next year, we’ve witnessed Yellen change the number of hikes from 4 to 2, as the numbers changed and the economic releases came in, the odds went down.
Now given the impact a Brexit has had on the global markets already, I will be surprised to see any Interest rate hikes at all this year. During her FED meeting to congress 2 weeks ago, she concluded that the US was on a much slower road to economic recovery than originally anticipated.
With the chances of a hike diminishing further and further, concerns regarding the US economy begin to materialise. Bill Gross – Janus Capital’s Fund Manager spoke with Bloomberg this week and announced that the US has a 50% chance of a recession this year, stating that the UK’s vote will “slow trade, immigration and growth around the world”.
Pay close attention to economic releases over the coming months, any signs of a US recession will have implications on the global markets.
Much like the rise of far right wing movements in Europe, immigration has become a hot topic for the US which is largely the reason for Trump’s success. Upon hearing the news of the UK’s vote Trump congratulated the UK stating that “they would be better off without the EU”. The UK’s decision could support Trump’s campaign by using it as an example as to why the US need similar measures in place to prevent further immigration.
With so much uncertainty ahead, and with little insight into how a Brexit will impact global economies, the above scenarios should be considered when making a currency transfer as they have the potential to move exchange rates. If you remain unsure as to when to make a transfer, our professional brokers are available to discuss your requirements and options throughout the day. So call us on 01494 725 353 or email me here to submit an inquiry.
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