Poor non-farm payrolls and retail sales have cast doubts on the US Dollars performance. With the US on the verge of war with North Korea there could be further scope for US Dollar weakness.
The ‘Trump rally’ – the increased confidence in the US stock-market and the increased confidence in hiring new employees – is something heavily touted by the Trump team, but it had been something which had filtered into currency markets, with the US Dollar continuing to knock at the door below 1.20. However, recent data has begun to question this. Recent job growth came in just over a third of what was expected, and Friday’s retail sales data for the US showed spending activity in the US shrinking for the second month in a row.
Low inflation than expected on Friday as well also puts in question when the next rate hike will be in the US. This is especially poignant for the currency markets given that much of the current value in the US Dollar is underpinned by a widely publicised statement from the FED that four rate hikes are expected this year ‘as long as the data supports it’ – and we are already seeing excuses to avoid raising rates popping up.
We will likely see further movement today for GBP/USD to drive up the pair further away from the 1.25 where it had previously been moored, as US markets were one of the few in operation across Friday and Monday, European trading opening once more today may be enough to drive it higher. Given that, like the UK, there is little economic news of note to be released this week for the US, this may be the driving narrative for GBP/USD this week. Without a correction, USD sellers may see rates run away from them. It’s hard to make a wrong decision selling US Dollars currently but rates were getting close to 1.28 only recently, and I would not be surprised to see that tested soon.
The US Dollar has suffered recently as well due to the increased conflict tensions following tensions in the Middle East. Over the Easter weekend talks with Russia came to a close with mixed reports. Trump stating that the talks were ‘very successful’. Immediately this was contradicted by Putin who stated that after the talks the ‘level of trust on a working level…has not improved, but rather has deteriorated.’
Again with ongoing tensions over the Middle East and now North Korea promising a new missiles test every week in response to American aggression, it is difficult to gauge where American foreign policy will take its next turn. Until then, with this level of anxiety, I struggle to anticipate the US Dollar gaining much value in this situation.
Do you have a US Dollar requirement and would like to speak to one of our experts? Global conflicts could begin to weigh heavily on the US Dollar and it may be worth talking to us sooner rather than later. Call us on 01494 725 353 and a member of our team will be happy to assist, alternatively you can email me here.
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