The outlook for the US Dollar at present is not a positive one. There are several concerns for investors following last year’s rapid increases against the majority of major currencies.
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There is the ongoing trade war with China - the 90-day truce is now over and the situation could escalate. China have agreed to come to the negotiations table to discuss its current economic strategy, but I would be surprised to see China make any changes to its strategy as it would be detrimental to Chinese growth. It could be the case that Chinese President, Xi Jinping will attempt to make as little concessions as possible in order to elongate the trade war until Trump is no longer in power.
This is a dangerous game. The Trump administration has threatened to increase tariffs to 25%, if China were to respond in a similar fashion this would not only hit the US and China but the global economy as the two superpowers slug it out.
Trump has recently ended the partial Government shut down following planes being grounded at Laguardia airport. The cost of the shutdown to the US economy is estimated to total more than $3bln. The wall drama is far from over and Trump has made threats to declare a state of emergency in an attempt to get his wall built.
Jerome Powell, The Federal Reserve Chair has recent had a dovish tone in regards to future interest hikes and has played down the potential of continuing rate hikes this year.
The US Dollar could be in for a tough time, unfortunately Brexit fears continue to weigh down the Pound and with GBP/USD currently above the key resistance point of 1.30 it could be time to move.
Tonight brings the US interest rate decision and I would be surprised to see any change considering the US current economic situation and Fed Chair, Jerome Powell’s recent comments. The Federal Open Market Committee (FOMC) press conference following the rate decision has the power to move the markets. It will be interesting to see if they give any hints to monetary policy moving forward. I would be surprised to hear of any imminent hikes.
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