The US and the USD has been continuing to gain in both momentum and value. The US’s recovery seems to have been cemented following the tax breaks and the trade tariffs, which are influencing the US domestic market. In a sign of this confidence, the Federal Reserve (FED) raised interest rates last week for the seventh time in the last 3 years. The table below shows the differene in Euros you could have achieved when buying £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
The Trump administration fiscal stimulus package has been a real shot in the arm for the US and the Fed is now predicting it will raise interest rates twice more this year.
This in turn has opened and widened the difference between the UK and the US monetary policy, which historically has tended to be more in sync. In the US, the Fed has raised rates at a steady pace now from 0.25% to 2% while the UK rate still stands at 0.5%, where it has been set 9 years ago at the high of the financial crises. The difference between interest rates is now the widest it has been for over 35 years and I personally expect it to continue. GBPUSD rates have equally moved in a straight line over the last 3 months falling by over 10 cents.
There are a number of Fed members speaking this week and their tones are expected to remain positive for the US, which is only likely to continue to inflate the dollar’s value. Later today housing data is released and is expecting to show improvements.
There is jobless figures on Thursday, which again is forecasted to show another improvement. Saying that however rates do not move in a straight line, I expect Thursday afternoon to be just an example. US manufacturing data is expected and forecasted to show a contraction in growth due to weather experienced.
This will most likely weaken the USD at that point making is slightly cheaper to buy. Good news I would expect for clients looking to buy USD this week, however I think even with this potential climb in value rates will probably end the week lower than where they are now for GBPUSD traders.
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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