After one of the longest periods of continuous growth in the US, markets are now wondering when the next recession may be upon us. As there appears to be a slowdown in China and Europe slowly taking shape due to two quarters of negative growth, this may not be too far away. If this was to be the case then the US dollar, which is considered as a safe haven currency, may actually become a more popular choice for investors. However, in the short term there is likely to be an immediate effect from UK side events in relation to Brexit to influence Cable exchange rates.
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This afternoon the Gross Domestic Product (GDP) data for Q4 is to be released with the expectation of a slight tick down to 2.4% from 2.6% from the previous quarter. As with all economic data, this has the potential to be different from the forecasted result so there is always the possibility of movement around these data releases, especially with the latest news surrounding an economic downturn.
Tomorrow there will Consumption Data along with New Home Sales. Following the announcement from Federal Reserve Bank (Fed) Chairman Jerome Powell earlier this month that there is unlikely to be another Interest Rate hike this year, the data will become a key indicator of the Fed’s decision making.
There will need to be a flurry of positive data in order for Powell to change his mind on the interest rate front with the chances relatively low as things stand.
Donald Trump had previously been clear that the Fed’s drive to rapidly increase the interest rates in the US was proving detrimental to US growth and looks as though his warnings were seen as correct. President Trump is now going to get his way and it will be interesting to see whether the US economy starts to fire again. The GBP/USD interbank exchange rate has remained around the low 1.30’s so far this week whilst the markets wait in shadows with regards to Brexit. The same scenarios arguably are still in place with a resolution on Brexit potentially bringing sterling strength; make sure you’re in contact with your broker to discuss your best options.
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