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. This market report looks at the affecting factors that could affect USD exchange rates over the coming weeks and months.
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There are a number of underlying issues that could impact the US Dollar's value moving forward, with whether or not interest rates will be hiked for the third time this year likely to be one of the key drivers.
My colleague Jonathan Watson covered this topic in detail yesterday so feel free to refer to yesterday’s Market Report for an in detail analysis on the subject. In essence, the Fed Reserve bank has plans for one final interest rate hike to meet its 2017 target, although a significant drop in US economic output or the jobs market could derail these plans, which I would expect to see result in a selling off of the US Dollar.
In the shorter-term future I think the US Tax Reform, or Tax cut as US President Trump is calling it is likely to impact the US Dollar depending on whether it has the support it needs to be implemented.
Trump is trying to simplify the tax system in the US, in a move he claims will benefit the middle class and result in raising the average US family income by $4000.
Opponents of the reform, which are mostly democrats have been quick to label the move a benefit only to the rich, a rebuttal Trump has repeatedly labelled an ‘automatic talking point’ of democrats. Trump singled out New York Senate Minority Leader Chuck Schumer and said that Schumer would say ‘oh this plan is for the rich’ before knowing what the plan even is.
Irrespective of infighting amongst US politicians, the US Dollar and the US equity markets reacted positively to news the Tax Reform will go ahead despite Democrat appeals against the idea, so I expect to see a similar market reaction should the Reform go ahead.
A number of data releases this week may determine sentiment regarding the Fed’s planned rate hike, so I believe this week’s data is certainly worth being aware of if you have an upcoming currency requirement.
The US Jobs market will be in focus this Thursday as Initial and Continuing Jobless claims are scheduled for release, and then on Friday US GDP figures will be released.
Both will provide us with an overview of US economic health, and readers of our reports have plenty of time to get in touch and plan around these releases as they take place at the end of the week.
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