With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. the below table shows the difference in USD you would have achieved when buying £200,000.00 during the high and low points of the past month.

Currency Pair% ChangeDifference on £200,000
GBPUSD3.00%$8,000
Federal Reserve’s Bostic states three hikes in 2018 could be too much

US FED raise key interest rates amid strong labour market

The US central bank last Wednesday raised the benchmark interest rate for the third time in 2017 and suggested it may not be as aggressive next year. They highlighted the strong labour market and solid economy as the reason for the hike.

The forecasts that they released showed no change from last time they updated the market, a further three hikes are still expected next year and then another one in 2019. These forecasts have however been wrong in the past and I personally expect that they will not raise interest hikes as frequently as expected.

Yes they are experiencing strong economic growth and if the tax changes pending from President Trump are implemented the economy is likely to grow faster still, but I think these gains may be years away rather than months.

There is also the argument that there are few signs that inflation is accelerating which is one of the main reasons for a hike in interest rates, plus unemployment is predicted to remain very low for some time. What I would add however is that even if they do half the amount of hikes expected, the interest rate differential between the UK and the US will get significantly wider. This in turn is likely to result in USD getting more expensive to buy with the Pound. My view is that the GBPUSD rate is more likely to fall below 1.20 rather than climb over 1.40 through the coming 12 months which is something to consider if you have a pending transfer to manage in the weeks and months ahead.

Data expected to make the USD more valuable

In the near future the price of buying or selling USD will be driven by data released in the US. There is a number of key releases coming this week including housing data on Tuesday, home sales on Wednesday, GDP figures on Thursday and Durable orders on Friday.

The data towards the end of the week is a lot more influential but as we start to enter the Christmas period with less liquidity in the market these releases could very well change the market by a larger amount than usual.

If I had a USD exposure I would be taking advantage of the current level which are only 2 cents away from the highest levels seen in the last year. If I had USD to sell I would be entering 2018 a lot more optimistic than 2017 as I expect the USD to get more valuable. However if there is a need this side of Christmas I expect the USD to get more valuable as the week comes to an end with a gain of 1.5% against the Pound not out of the question.

Thank you for reading today’s USD market report, I would greatly appreciate any feedback you have and would take pleasure in replying personally. I am more than happy to assist you with any of your currency requirements. Feel free to e-mail me at hse@currencies.co.uk.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.