The US economy continues to show signs of impressive growth, with Gross Domestic product (GDP) figures expected to hit 4% for Q2 of this year. Trump's options on interest rates which differ from the Fed could unsettle the markets as further interest rate hikes this year have largely been factored into the USD's value. The table below displays the range of exchange rates during the past month, showing the difference in return you could have achieved when selling £200,000.00 during the high and low trading points.
|Currency Pair||% Change||Difference on £200,000|
This is an impressive return considering the current strain on global markets, although it seems as though President Trump’s tariffs are having far greater impact on the EU & Chinese economies, than they are on the US economy at present.
The USD has impressed for some time now, holding its positions against Sterling around 1.31. These levels continue to offer a huge amount of value for those clients looking to sell the greenback and buy Sterling, especially when you consider the history of the pair. However, despite the Dollar flying high on the back of a bustling economy, coupled with deep-rooted concerns regarding the UK and its upcoming separation from the EU, it has yet to make any significant move below 1.30.
It tested this level for the second time in a month last week but once against the Pound found plenty of support around what has become a key threshold for the pair. It may be that the USD does break through this resistance level once again, especially if no agreement can be reached between the UK government and the EU regarding a Brexit deal. However, for the time being the Pound seems to be holding firm and as such, those clients holding USD may wish to remove any risk from the market and sell their currency positions at some of the best rates we’ve seen in the past 9 months.
Whilst the US economy continues to move forward, investors are likely to have factored in, at least to some extent, the chances of further interest rate hikes by the US Federal Reserve. It is widely anticipated that the FED will hike rates at least twice before the end of 2018 and this in itself will be helping to drive the USD’s value.
However, President Trump seems to be against such a move and ramped up his criticism of the central bank recently.
He cited increased financial tensions between the US and some of its key economic partners, as a reason as to why the FED should be holding rates. With the current base rate sitting at 2% and a target of 2.5% by the end of 2018, are the FED on a collision course with Trump and if so could this have any ramifications for the greenback?
In truth, Trumps outspoken views are unlikely to significantly affect the central banks thinking as they remain an impartial entity, who clarim not to be influenced by political stances or decisions. However, any further commentary by the worlds most outspoken of Presidents may have an impact on investor confidence and as such, this could be another potential trigger which could stop the USD spiking aggressively below 1.30 against Sterling.
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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