GBPUSD rates have remained rather range bound over the last few weeks with a movement of only 3 cents. This may not sound like much but can quickly add up as timing a £200,000 transfer well or poorly over the last month adds a further $6,000.
|Currency Pair||% Change in 1 month||Difference on £200,000|
The majority of this movement has been as a result of end of year flows and indeed speculation on the year ahead with regards to Brexit in the UK and potential interest rate change in the US. Even with Trade wars ongoing and as the US Government is now in its third week of shut downs, (this as President Trump demands $5 billion of Government money to build a wall on the Mexican border), the strength of the US economy is showing little signs of slowing down.
On Friday US jobless figures were released and showed a greater expansion than expected. 312,000 jobs were created in December which was well above the expected figure, wage growth also released at 3.2% for the year, the fastest pace since 2008. The unemployment figures crept up to 3.9% which is the highest level since July however through 2018 the economy added 2.6 million jobs. Yesterday the US also released their latest non-manufacturing ISM survey, this came out at 57.60 down from November’s 60.70 but still showing consistent growth and it remains near the all-time high levels seen in September.
In the medium term a lot of value of the USD will be determined by the forecast for interest rate changes throughout 2019. This has been a talking point for some time as it is expected that US growth has peaked, plus the very public pressure put on the Federal Reserve (FED) by President Trump to not raise rates. During 2018 interest rates went up four times, the last only in December, and into 2019 three hikes are currently expected. The Chairman of the FED, Jerome Powell, said markets that were worried about a downturn are “well ahead of the data” suggesting more growth is to come and with that further hikes. As a result looking forward keep a keen eye on main economic data for the US, like jobless figures and comments by the FED about future growth expectations. Personally, I see rates climbing further which would in turn likely increase the US dollar's value making it more expensive to buy. Any slowdown in hikes I think would not come until at least Q3 of 2019 so is something to consider if you have an exposure through 2019.
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