It is apparent that in recent months, the Dollar has been the superstar currency setting the standard for its main counterparts, notably the Pound and Euro. Its current interest rate of 2.0% is far ahead of 0.75% in England and 0.0% in the single market. The USD report below discusses the reasons for this, the table shows the difference in US Dollar return you could have achieved when buying £200,000.00 during the high and low points during the past 4 days.
|Currency Pair||% Change||Difference on £200,000|
Since April, Cable rates have dropped from 1.43 to the current 1.27 and EURUSD rates have also gone down from 1.24 to the current 1.14 levels – a 10+-cent gain against both currencies.
Not only is the US economy performing well but it seems to be benefitting from uncertainty around trade wars and Brexit, as well as the developing crisis in Italy and now Turkey.
On Friday positive inflation levels were released in the US, before the crash in the Turkish Lira drove investors away from riskier based commodity currencies and into the safe-haven currencies, of which the USD is one, sending its value higher.
Because of this crisis, I believe the biggest one-day loss for the Euro is past us, however it seems that we have not heard the last of European banks being affected by the situation in Turkey, which will only increase risk and uncertainty.
This along with positive economic data stateside, gives every reason to think the Greenback’s surge may not be stopping soon.
The underlying faith that markets hold in the USD at present was exemplified last week when propositions with concessions were made from EU officials in Brexit talks which led the Pound rebounding against all its major currency counterparts – except the Dollar.
Though there are average earnings, inflation and retail sales data being released UK-side from today through to Thursday, I would not be surprised if market fluctuations were amplified with positive releases from the US, potentially sending cable rates towards the 1.25 level. We have not seen this level since April 2017.
The main data releases from America this week are retail releases tomorrow as well as Housing and jobless claims on Thursday. Where will Cable go? The way the markets have been going recently, I would not be surprised to see steady data from the UK combined with positive releases Stateside, moving GBPUSD towards 1.25. On the flip side, Dollar sellers holding out for 1.25 may be disappointed, as I feel Brexit concessions should support the Pound in the short term.
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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