It would appear that a US rate hike is becoming less and less likely as we approach the referendum and the US presidential elections in November. With Clinton and Trump now neck on neck, are we likely to see further US Dollar weakness?
GBPUSD rates have been trading in a very thin range recently with slow movements in an upwards direction. Recently data has been rather mixed for the US and Fed Chairlady Janet Yellen has claimed on a number of occasions since the start of the year that a US interest rate hike is data dependent.
However, last week’s Non-Farm Payroll data showed the lowest job creation since 2007 and softer Retail Sales means that an interest rate hike on June 15th seems extremely unlikely.
The statement due to be published shorter after the rate decision will likely provide us with more clues as to when or if the Fed may next move and although many analysts are expecting 2 more interest rate hikes this year I would not be surprised to see them stall and may be even postpone them as we head full on into the next phase of the election campaign in the US.
Indeed, with the Democrat Hilary Clinton directly standing against Donald Trump we are now in for a very interesting next few months ahead and we could see some big movements for GBPUSD rates during this time.
When previous President Obama came into power the USD hit close to its strongest level in history vs Sterling at 1.35. However, I would be surprised to see much Dollar strength in the run up to the US election as neither candidate at the moment is showing a clear lead.
Sterling has also increased against the Dollar yesterday owing to the UK manufacturing data and US Initial Jobless Claims due out at 1:30pm this afternoon. If the figure highlights further slowdown for the Jobs market this could cause the Dollar to weaken vs Sterling and we could even see GBPUSD rate challenge the 5-month high that was hit last week.
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