James Lovick
Associate Director
USD Outlook
Investors look to North Korea and further developments which would cause pressure for USD as economic data isn’t lending much in the way of support.
Getting the best exchange rate can be achieved by understanding what is driving rates and the service of a specialist currency broker. Below are movements during trading hours yesterday affecting USD rates when buying £200,000:
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBP/USD | 0.5% | $1280 |
USD – North Korea – Foundation Day
The US dollar could see considerable volatility this weekend if developments continue to unfold in North Korea. Geopolitical tensions stemming from North Korea continue to drive the markets with a flight to safety to the US dollar, Swiss Franc and also gold as to be expected.
This Saturday marks Foundation Day in North Korea and is one of the most important days in the North Korean calendar. After North Korea conducted its sixth nuclear test last weekend there is every chance that Kim Jong Un may look to demonstrate another missile or nuclear test, escalating tensions further. Any developments here or firing of any Frankenstein missiles could see major market volatility.
To date there has been some currency volatility but the markets have largely shrugged off the threat of nuclear war. Any further escalation could see the use of military action and should not be ruled out.
The North Korean Ambassador to the UN has said that North Korea is ready to send more “gift packages” to the US in a clear sign that things could deteriorate further before they get better.
Fed Vice Chairman Resigns – USD Impact
The Federal Reserve vice chairman Stanley Fischer has handed in his resignation midterm and is expected to leave in October. This is important as Mr Fischer has shown himself to be a hawk who wants to continue to raise interest rates. He is also a believer in more regulation. His resignation will allow US President Donald Trump to put in place another member who may have influence to tilt the Fed towards less regulation. This could have the effect of changing the course of interest rate increases going forward and the dollar could come under pressure. The President will also have to decide whether to offer Fed chair Janet Yellen a second term.
US Data – Dollar Outlook
There are a handful of US economic data releases this afternoon to include jobless claims and a speech from US Federal Reserve member William Dudley. Any clues as to whether the US Fed will look to hike could see additional volatility for the US dollar. US non-farm payroll numbers last week arrived weaker than expected which in my view wipes out any prospect of another interest rate increase at the next meeting September 20th. The Fed may look to hike in December and go for the hat trick considering December has recently proven a popular month to hike although next year could now be the earliest with the changing outlook. The dollar could see some more weakness if the economic data continues to look on the softer side.
Thank you for reading today’s market report, I would greatly appreciate any feedback you have and would take pleasure in replying personally. I am more than happy to assist you with any of your currency requirements. Feel free to e-mail me at jll@currencies.co.uk.
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