The dollar has continued to be the dominating currency in the market. Yesterday the dollar reached an interbank rate high of 1.2455 against the pound and 1.1206 against the euro.
|Currency Pair||% Change (Month)||Difference on £200,000|
While it is largely expected that the Federal Reserve is expected to cut interest rates at the end of this month, it is yet to be seen if it is a 25 or 50 basis point cut. The underlying economy in the US is very strong, and demand is very strong for the dollar, however the odds are in favour for a 50 basis point cut. New York Federal Reserve President, John Williams said on Thursday
‘It’s better to take preventative measures than to wait for disaster to unfold. When you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress.’
The US dollar strength has the potential to continue as their higher interest rates will attract investors compared to other developed economies. The US dollar may continue to be a ‘safe haven’ currency in particular for investors who are risk-averse to the ongoing Brexit saga with the EU. Geopolitical tensions arising around the Gulf of Oman, have also provided support for the US dollar for risk-averse investors.
Today, US existing home sales for June are forecast to come in at 5.35 million versus a previous figure of 5.34 million for the month of May. A better than expected figure may show the strength of the US housing market and supportive of the strong dollar and economic strength currently seen in the US.
Tomorrow US Manufacturing PMI and Services PMI (Purchasing Managers Index) data is released, both expecting to come in better than expected and showing expansion in both sectors. US New Home Sales for June are reported as well as Crude Oil inventories both forecast to come in better than expected.
The main event for the dollar is second quarter GDP data on Friday, which is forecast to show the US economy growing annually at 1.8%, down from 3.1% in the opening quarter of the year.
For clients who are looking to do a US dollar exchange, you may wish to contact your account manager so they can keep you abreast of these economic developments.
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