The US Dollar could be set to find strength as a result of increased trade tariffs to be levied on China to the effect of $60bn, as investors move towards the Greenback and away from riskier commodity based currencies. This report discusses how Trump's international tariffs could impact the global markets. 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|
Donald Trump has once again shaken the financial markets following an announcement yesterday, that he would penalising China with an additional $60bn in tariffs.
This decision was seen by many as antagonistic and the latest shots fired in an escalating trade war between the world’s two largest economies.
Trump has a knack for grabbing unwanted headlines and whilst yesterday’s shock move has yet to impact the currency markets, it is yet another move to internalise manufacturing and production within the US, which in turn is going heavily restrict external trade. This protectionism is a cause for concern, with the Swiss National bank (SNB) one of many key institutions to voice their distress at such moves.
The USD has yet to feel the impact of this decision but ironically may in fact find support over the coming days, as investors flee from riskier, commodity based currencies and back in to the safer haven USD. This is generally the market trend in times of global economic uncertainty, so anyone with a USD currency position to exchange before the weekend should be keeping a close eye on developments throughout Friday’s trading.
In other breaking news Trump’s lead lawyer for the special counsel investigating the Russian interference into the 2016 US election has resigned.
John Dowd has reportedly stepped down, after concluding that that Mr Trump was increasingly ignoring his advice. Unsurprisingly the White House’s retort to this was that Trump had lost confidence in Mr Dowd’s ability to handle special counsel Robert Mueller.
Either way Trump does what he does best, by ensuring every major headline this morning included his name but will news of a further breakdown in his “inner circle” cause investors to panic and impact the USD value?
Thus far it seems to have taken a back seat to his decision to impose the huge tariffs already discussed but any uncertainty in a political team, particularly one that is meant to be leading and inspiring the free world, is hardly likely to drive investor confidence.
The USD itself started to weaken yesterday, particularly against Sterling, which is now likely to find plenty of support around 1.40.
The EUR also found some support against the greenback yesterday following Trump’s announcement, with the EU only 24 hours away from having similar tariffs enforced on them. Whether that timeline may now change is yet to be confirmed but EUR/USD rates are holding frim around 1.23 this morning. As such, it may be worth protecting any EUR/USD positions today, before Trump looks to grab yet another unwanted headline.
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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