US inflation has rocked the markets. This report looks at what the latest Consumer Price Index data could mean for future US interest rate hikes and USD rates. The below table shows the market movements for the GBP/USD rate in the last 2 weeks:

Currency Pair% ChangeDifference on £200,000
GBPUSD3.56%$9820 USD

Last week the selloff in the US Stock market was fuelled of the back of rate hikes in the United States being only just around the corner. The belief that interest rates would offer faster and safer returns convinced many investors that moving money away from stocks could offer greater rewards in a savings account.

US Inflation rocks markets

Yesterday the Consumer Price Index (CPI) data for January beat the expectations by 0.2% and matched the previous month of 2.1%. Analysts had expected a slowdown from December to January, but this release many will argue could nail on a March interest rate hike at the next US Federal Reserve meeting.

The stock market did drop at the opening bell following the data, but 2 hours into the US trading day yesterday the market had made back the losses. The Federal reserve now control the key to the near term volatility as record low unemployment levels along with growth set to get a major boost when the new tax cuts come into place shortly.

The American economy looks set to continue to strengthen, with inflation likely to follow suit the three interest rate hikes this year currently look a certainty.

US Dollar Volatility Yesterday

Yesterday afternoon the US Dollar gave up over 1% against Sterling in the space of a few minutes. This was off the back of the expected inflation fallout in the stock market, once the markets settled there was a mass US Dollar sell-off as funds left the safe haven currency. The spike however only really helped Sterling move back off recent lows following the 18 month high at the start of the month. In the last 20 days timing a £200,000 transfer at the right moment could have helped you achieve an extra $10,600.

The GBP/USD rate has dropped nearly 4% over the last few weeks an should the expected interest rate hikes come to fruition then that past could continue. If you’re looking to buy or sell US Dollars make sure you’re in contact with your broker to discuss your best available options.  

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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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.