The USD has shown its durability once again over recent days, hitting a high of 1.2556 on the interbank rates against GBP, having slipped back above 1.27 only last week.
|Currency Pair||% Change (Month)||Difference on £200,000|
The Dollar has enjoyed once of its longest runs of almost uninterrupted gains against sterling over the first two quarters of 2019, holding its position comfortably below 1.30 and trading only a couple of cents shy of near 30-year highs.
This position of strength is perhaps no surprise, when we consider that the US economy has just entered its longest period of economic expansion in history. July marks the 121st month since the last recession, eclipsing the infamous Nineties “Boom”. The current stretch of continued growth is the longest since at least 1854, and has helped the USD prosper over recent months, whilst many other currencies have seen their value contract.
What is perhaps even more impressive is that the US economy has managed to achieve this feat during such an unsettling period in global history. It’s managed to navigate hurdles including the Eurozone crisis, turbulence in the developing world and even the trade wars, which ironically were initiated by the current President Donald Trump.
Whilst this is of course a very impressive statistic, there are still murmurs of an economic slowdown around the corner. These rumours have been backed up by some of the recent economic data emanating from the US, with Service data showing that the US economy is now growing at its slowest pace in two years. These figures, along with a deep-rooted concern that the current trade war with China may leave a lasting negative impression on the US economy, mean that the current upward trajectory may not continue over the coming months.
There is also a high percentage chance that the US Fed will cut interest rates at the end of this month, with the likelihood of a 25-base cut probably now priced into the current USD rate. If there was a 50-base cut for example, then we could see the USD weaken against GBP as a result.
There is also the very real concern, as highlighted by BoE governor Mark Carney, that the current US trade war will have negative repercussions, not only for the US economy, but also the global markets.
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