Minutes from the latest Fed's meeting suggest confidence in the continuing growth of the US economy, supporting the idea of further interest rate hikes being required towards the end of the year. This report discusses this as well as other factors affecting the USD currently. The table below shows the difference in USD you could have achieved when buying £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
The USD has been gaining in value recently and now is nearly 4% more expensive than a month ago against Sterling. The majority of this could be attributed to Brexit uncertainty weakening the GBP but equally the economic health of the US has been getting stronger and stronger. Following the tax cuts being implemented and indeed the debt ceiling being lifted US growth and confidence has been nearly unstoppable. Recent data showed that US small-business confidence rose to a record high in 2018 Q1. The minutes from the latest US Fed’s meeting suggested that they were expecting US growth to continue to gain momentum, indicating a faster pace of interest rate hikes later in the year. US ISM Purchasing Managers Index (PMI) showed that manufacturing activity expanded in February at its fastest pace since 2004. Claims for jobless support in the US have also fallen and were close to their lowest levels since the early 1970s two weeks ago.
All of this have helped the USD gain in value and this is something I personally expect to continue to see.
I think GBPUSD will continue to trend negative and forecast 1.35 being a lot more likely before 1.45.
Saying that however rates never move in a straight line so timing a transfer remains key when trying to achieve the best levels for your positions. US Political tension remains a hot topic, both with the connection to the Russian Government and indeed the surprising turnover of head members of President Trump’s Government. Since being elected a year ago over 30% of the top positions have changed already, perhaps showing the uncertainty and therefore the quick changing position of the Government on key topics. This is something to continue to watch especially as we await any military comment following the Russians 'show of force' presentation last week.
In the near future there is expected to be more uncertainty to come for the US economy as President Trump promises to bring in import tariffs on raw materials including steel and aluminium. Many expect this to be in the region of 25% - 10% respectively.
The fall out of this could result in 'trade wars' with China and Europe and potentially could weaken the US's attempt to strong arm China to put pressure on the North Koreans and their nuclear program. In the shorter term many expect this to have a positive impact on the USD as investors buy the USD as a safe haven from any fall out from this decision.
Economic data due from the US this week includes Service PMI this afternoon which is expected to come out strongly for the USD, factory orders on Tuesday which is expected to show a fall, Trade balance on Wednesday and Jobless figures on Thursday. Personally I expect the USD to go up in value this week with the cheaper times to buy with GBP to either be this morning or Wednesday on the trade Balance figures.
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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