GBPUSD rates received some respite during Friday afternoon’s trading with cable exchange rates now just below the 1.33 level. Whether or not the rate will hold at this level is the next question, with a host of economic data on both sides, Brexit and the threat of a trade war all still ongoing factors. The USD report below looks into the ongoing impact of these factors, and what could happen to cable rates in the medium term. The table below shows the difference in USD you could have achieved when selling £200,000.00 during the high and low trading points of the past month.
|Currency Pair||% Change||Difference on £200,000|
The USD has been on the charge against Sterling since Mid-April, with the Dollar Index now up 7% since then. most of the strength can be attributed to his ‘America First’ policy with regards to Trade which has sparked an all-out trade war between China and the EU. Over the weekend, President Donald Trump has now taken aim at the EU, stating the bloc are ‘as bad as China’ when it comes to trade.
So far, the steel and aluminium tariffs have resulted in retaliatory measures from the EU on goods such as motorcycles and whiskey. It is reported that trade war with China now stands at around 250bn with of measures, whilst on Sunday Canada hit back at the steel and aluminium tariffs by imposing $13bn worth of tariffs on US exports. The dollar has been benefitting from threat of an all-out trade due to its safe haven status, as investors will protect their assets by buying USD.
One question that remains though; has Donald Trumps’s ‘America First’ policy worked? The data next week (covered under ‘Data next week’) will be closely watched, if the data comes out in line with predictions then economists are predicting the US economic growth to hit the 4% for the second quarter, outperforming the rest of the world by a long way. With this in mind, I believe that any short-term spikes such as Friday’s performance should be taken advantage of with USD strength on the horizon for some time, with GBP weakness and USD strength combined I think it’ll be a matter of time before rates drop below 1.30 and stay there.
As explained in my previous section this week is an important week for Data releases, the most important release being Friday with the labour market data released Friday. Before then a host of data with manufacturing, services and construction data all released and the Fed minutes on Thursday to keep you entertained. Get in touch to find out how this will affect your trade.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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