The US Dollar has gone from strength to strength against the Pound and a majority of the major currencies this week, gaining by over 2% against Sterling over the course of the past 7 days. That is a monetary gain of £3,282 on a sale of $200,000 and represents the best time to buy Pounds with Dollars since November last year. The range of exchange rates over the past 30 days is displayed in the table below, along with the difference in the Euro return you could have achieved when selling £200,000.00.

Currency Pair% ChangeDifference on £200,000
GBP/EUR1.5%€3,400
Continuous rise in rates and Tade War could spell trouble for US economy

The US recently raised interest rates to 2% which signals an underlying strength in the US economy and widens the gap between the Federal Reserve and the Bank of England/European Central Bank’s fiscal policies. With the ECB only this week pushing back the chances of an interest hike until the end of next year and the BoE sitting on their hands whilst Brexit uncertainty continues, I believe that this gap is only likely to widen in the near future which is likely to continue to drive the strength of the Greenback.

In my view it is only matter of time before GBP/USD falls below 1.30 based on current sentiment and would urge any clients with a GBP/USD transfer to contact their account manager here to find out how you can limit your exposure to further Dollar strength.

Global uncertainty and interest rate gap is strengthening the Dollar

Although it is the US and Trump who are the ones stoking the fire and causing the trade row, which many fear could evolve in to a full blown trade war with the rest of the world, the US Dollar has become the main benefactor of these events, one of the reasons why we have seen the USD reach it’s 7-month high. The biggest row has been between the US and China, with Trump initially threatening to impose tariffs on $50bn of Chinese goods and this week ramping up his attack and threating to impose an additional $200bn in tariffs.

As a result of the uncertainty that this has caused we saw the Dow Jones, European and Asian markets crashing. It could be argued that you would expect the currency at the centre of this row to weaken, but as the Dollar is viewed as a safe haven by investors in times of global uncertainty, this is fuelling USD gains. The Eurozone is set to retaliate to US tariffs imposed on Friday so we could see further volatility on the currency markets at the end of the week.

 

Data from the US is light for the rest of this week, but key data to look out for next week will be jobless claims and GDP figures on Thursday. With the US economy performing well at present we could see further gains for the USD next week if these figures impress, which could spark a move towards and below 1.30.

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.

Download our monthly currency forecast

Download here

News

Read more articles
Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.