The US Dollar benefitted from a fresh wave of political uncertainty yesterday as turmoil in British politics threatened to undermine Brexit and UK-EU relations. As a safe haven currency the US Dollar will find value in times of uncertainty and the prospect of the fragile Brexit process coming undone saw the Dollar. The USD report below discusses how this political uncertainty impacts the Dollar positively. In the table below, the range of GBP USD exchange rates throughout the past month and the difference in return when selling £200,000.00 during those times is displayed.
|Currency Pair||% Change||Difference on £200,000|
The greenback was already doing well as we began this week following an improved economic outlook after the all-important NFPR (Non-Farm Payroll) jobs reports on Friday evidenced further strength in the US economy. The US appears on track to raise interest rates further in 2018 with a further two hikes planned bringing the total this year to 4 versus the 3 initially predicted.
The Fed rate is currently 2% which sets itself as a much more attractive currency versus its peers. With the Eurozone interest rate between -0.25 and -0.4 and 18 months away from any possible hike, plus the UK at 0.5% and debating a hike before year-end, the fundamentals which are supporting a stronger US Dollar look set to remain.
Whilst all is generally rosier for the US dollar, you can always rely on one man to grab headlines which might unsettle investor’s nerves. Donald Trump begins his UK tour on Thursday and there is plenty of scope for some comment or tweet to get the market going. Trump has made no secret of his support for Brexit and he could easily pour some comment on an already volatile situation which would hype up tension on GBPUSD.
With GBPUSD struggling yesterday on the political concerns in the UK, the scope for the US dollar to rise further against the pound looks high to me but as the last 24 hours have proved, we can never take too much for granted on the currency markets.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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