With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The table below shows the difference in USD you would have achieved when buying £200,000.00 during the past month.
|Currency Pair||% Change||Difference on £200,000|
Yesterday morning, President Trump threw a potential spanner in the works of the Government’s budget negotiations and appeared to go against his fellow Republicans. Trump used his Twitter account to voice his opinion on the Children’s Health Insurance Program (CHIP), to bring the Government shutdown over the weekend that much closer. Congress need to pass all of its short-term budgeting by Friday otherwise it will go into a state of ‘shutdown’, when all non-essential Federal agencies are closed. There have only been 18 Federal Government shutdowns in its history. The thought of the Government shutdown has been accredited to the recent bout of Dollar weakness, among a list that seems to be ongoing for the US at present.
If talks aren’t resolved today I would expect severe losses for the US Dollar across the board.
One of the key drivers for the Dollar’s strength has been the expectations of three further interest rate hikes this year, and as we have seen of late as these expectation fade, so too does the Dollar’s strength.
The prospect of an interest rate hike by the federal reserve is data dependent and with a string of positive data releases this week, including stronger than expected industrial production figures and jobless claims, despite the horrid weather that most parts of the US has experienced in recent times. These data releases have helped to push expectations of three rate hikes back to 55% from 48% and with expectations helped to strengthen the Dollar ever so slightly yesterday. I would largely expect the GBPUSD rate to stay range bound between 1.38 – 1.40 for now. A weak Dollar is actually helping the US economy in terms of imports and foreign investment, something to consider. I personally think that if Brexit talks go well, we could start to break through the hugely psychological barrier of 1.40.
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