The US Dollar has found further support following better than expected GDP figures. But how long will this support last with the US elections looming?

US Dollar rates gain on stronger GDP data

The US Dollar has received a boost following better than expected US GDP numbers which arrived higher at 1.4%. Other data was mixed with an improvement in jobless claims but there was a fall into negative territory for home sales. The headline GDP number will be welcome news for the Federal Reserve and should reinforce that pending interest rate hike.

The minutes from the last meeting showed a 7-3 split in favour of no change so any improvements in the economy will help to swing that balance.

My view still remains that the US will still look to hike this year and that next hike will come in December 2016. This would mark a one-year anniversary since the quarter point hike in 2015 and this is based on a Clinton victory. Although the US Federal Reserve is supposed to be independent from politics, a Trump presidential election win in my opinion could certainly muddy the outlook for the Fed.

There were supposed to be three US rate hikes by now before everything changed at the start of the year with the Chinese slowdown. The Fed surely must want 1 out of 4 by the end of the year.

US Presidential election impact on Dollar

The US Dollar maintains the upper hand as it holds on to its safe haven status despite political uncertainty. The Dollar has not seen any negative repercussions from the presidential election campaign to date but there is still plenty of time to see the Dollar weaken ahead of the vote in November. This week’s TV debate saw Hilary Clinton perform best although Donald Trump profusely denies this. A stronger Hilary Clinton in my view this has helped support the dollar. There will be more rounds of TV debates though and a change of tact from Donald Trump could see things change for the dollar. USD GBP remains close to a 31 year high which continues to present an excellent opportunity for clients selling dollars.

Those looking to sell US Dollars for Sterling should consider making the most of the recent highs ahead of the US elections. Call us on 01494 725 353 to discuss your requirements.

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