GBPUSD rates have fallen in recent days due to the upcoming EU referendum, but US data has been fairly mixed recently with the odds of a US rate hike today sitting at 2%. A vote to remain in the EU could see GBPUSD rates strengthen significantly.
The dollar has been under pressure over the last two weeks following global growth concerns and weaker data from the US. The recent and rapid decline as far as GBP USD is concerned however is simply as a result of the uncertainty surrounding the British referendum on EU membership. Sellers of dollars are looking at good some good opportunities considering the future path for dollar exchange rates is less clear.
This evening sees the US Federal Reserve decision on whether to raise interest rates again since that first hike in December 2015. Considering the barrage of issues the Fed is being faced with, it is almost a given there will be no second hike tonight. The recent and dire US nonfarm payroll numbers will be of immediate concern for the Fed tonight, which highlighted the US only created 38,000 jobs in May, the lowest level in five years and considerably lower than the 162,000 that was expected. The potential for a Brexit which is gathering momentum will naturally be of concern and the associated financial contagion that may spread across the financial markets.
The Bank of England and the European Central Bank will be equally concerned. For me there is no chance of a US hike this evening and this should really keep the pressure on the dollar going forward. What will be interesting though is any comments suggesting when the next hike is likely to be. Janet Yellen has proven numerous times this year that she will reintroduce the principle of raising interest rates and then decide nearer the time whether it is appropriate. I wouldn’t be surprised if we see the same again here with the Fed buying themselves some more time.
There are a handful of other economic releases which should keep things interesting for the dollar today to include producer price numbers, manufacturing data and mortgage applications.
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