As the US Dollar continues to ride high in the wake of Brexit, we question whether the currency is overvalued given the poor economic releases, dovish outlook from Janet Yellen and the Interest rate decisions.
The US Dollar has been one of the main benefactors from the fallout from the Brexit. With Cable (GBP/USD) hitting a new 31 year low during yesterday’s trading session (and also overnight) the greenback is going from strength to strength, but not everyone is happy as to why.
The principle driver for USD strength has been the global uncertainty which has gripped markets worldwide. The USD is traditionally considered a safe haven currency and therefore people flock to it in times of uncertainty.
When we consider how the originally planned 4 interest rate hikes throughout 2016 have been cut down to just 2, and now it’s looking like even those 2 hikes won’t materialise until next year due to the US economy not warranting the increases, it’s hard to justify the Dollars gains outside of it’s safe haven status.
Personally, I think USD sellers have been dealt a favourable hand here with an overvalued currency due to unforeseen circumstances in financial markets, and those sellers may wish to consider taking advantage of the rates as once risk sentiment returns to markets I think we could see the Dollar fall fast. Feel free to get in contact with your broker for market updates on cable, as the pair appear to be the most volatile at present of the major currency pairs.
The major news releases this week in the US consist of Fridays Unemployment rate and Non-Farm Payroll figures, both released at 1.30pm. Non-Farm payrolls figures indicate the number of new jobs created during the previous month, minus jobs in agriculture. After substantially disappointing last month expect this figure to be a potential market mover.
GBPUSD is one of the most volatile currency pairs as current and timing a suitable currency exchange can be difficult, one of our brokers may be able to help. Call us today on 01494 725 353 or email firstname.lastname@example.org to make an inquiry.
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