The Dollar has benefitted substantially against the Pound’s recent slump as we move in to May, with Cable hitting its lowest levels since January. The table below illustrates this and shows the high to low GBP/USD rate movement during the last 30 days.
|Currency Pair||% Change||Difference on £200,000|
The drop in the GBP/USD rate comes as it looks more and more unlikely that the UK are going to raise rates this month due to a slowdown in economic performance across the board, whilst the Dollar revs its engines ahead of the Federal Reserve’s interest rate decision this evening.
In fact, the Dollar gained by more than 1% against the Pound during yesterday’s trading alone, meaning that a $200,000 purchase could been as much as £2,000 more expensive when comparing between the high and the low of the day.
In my opinion, I don’t believe that we are likely to see an interest rate hike this evening, with speeches from Fed policy makers in the run up to the event remaining fairly dovish. I believe that instead we are likely to see a rate hike in June.
As long as the Fed remain bullish and don’t make any back-tracks away from the two-three hikes that are expected throughout the remainder of this year then we are likely to see the Dollar remain strong and could therefore see some excellent opportunities for Dollar sellers.
Monday’s inflation data showed that inflation is rising to near the two percent target so there is growing pressure on the Fed to keep pace with interest rate hikes. With no press conference after this evening’s announcement we will have to rely on the Fed’s pre-prepared policy statement to give any initial hints to future policy, whilst there is also a speech from Fed rate setter William Dudley on Friday. Dudley has been bullish in previous statements on the strength of the economy and if he maintains this stance we could see further support for the Dollar. With this in mind any clients buying Dollars in the near future may be sensible to speak with their account manager here before tonight’s announcement to put a plan in place should the Dollar make further gains.
One potential stumbling block for the Fed in the future could be Trump’s protectionist trade policies and his ongoing disputes with China. Trump has threatened to impose tariffs on $50bn in Chinese exports and China have responded by saying that they will impose tariffs of their own on US exports in to the country. A trade delegation from the US is expected to be sent to Beijing tomorrow to try and resolve this issue so keep an eye out for events as they unfold as this could have an impact on the cost of your currency transfer. Trump has delayed separate tariffs this week on Canada, the EU and Mexico this week already so it will be interesting to see if his stance softens on China too.
Friday this week will also be a key day for the Dollar with average earnings, unemployment and Nonfarm Payrolls data for April. All of these figures will be under added scrutiny as a strong jobs market and rise in average earnings is used by the Fed to determine whether or not the economy is in a strong enough position to cope with a rate hike.
For more information on how future events could affect your currency transfer, call our trading floor on 01494 725 353.
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