The US dollar strengthened against its major currency counterparts yesterday after US Inflation figures were released marginally better than expected, coming in at 2.2%, just above the 2.1% forecasted. This provided our clients selling US dollars with another great opportunity to do so.
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Another factor to the strengthening US dollar was that trade talks between the US and China appear to be progressing well. When asked about how the talks were going yesterday in Beijing, US Treasury Secretary Steven Mnuchin replied ‘so far so good’, which was taken positively by the markets.
US tariffs are expected to rise from 10% to 25% on $200bn worth of Chinese imports if a deal cannot be reached by 1st March, which would have enormous consequences on global trade. However the US dollar strengthened, following discussions of a delay being possible should a deal not be reached during the president’s visit to Beijing this week, which would give the two leaders of the largest economies of the world longer to conclude a deal.
News yesterday that US President Donald Trump appears to be edging towards signing a deal with Congress regarding the funding of the Mexico-US wall was also taken positively by the markets, in the hope of avoiding another partial Government shutdown. The last partial shutdown lasted five weeks and ended in January, and cost the US economy $11bn, of which $3bn will never be reversed. However Trump still hasn’t committed to agreeing to the funding agreement until he sees physical legislation, and although it is likely that he will approve the agreement, it is often safe to expect the unexpected wherever Donald Trump is involved.
The deadline to approve the new funding agreement is on Friday evening, where it must be passed by the House of Representatives, then through the Senate before being signed by Trump, and if this isn’t done by midnight on Friday another partial Government shutdown will be triggered.
The agreement reached on Monday only commits to giving just $1.37bn towards building the wall, far short of the $5.7bn Trump is requesting. It is hoped that a vote will take place this evening to pass the bill through the House of Representatives, and then through the Senate tomorrow. Clients with a US dollar requirement should pay close attention to this, as another shutdown would likely cause the US dollar to weaken, especially as we now understand the extent of the damage caused for the US economy just last month.
This afternoon sees the release of Continuing and Initial jobless claims, along with US Retail Sales figures which are expected to show a sharp decline from 0.9% to 0.4% in December. If this is the case, or if the figure is any lower than this, I would expect the US Dollar to lose some, if not all of the ground gained yesterday against the pound. Get in touch to discuss your upcoming transfer, and how to best time this around these events.
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