The USD’s dominance has been impressive to say the least, up against all major currencies since the start of the year. The Dollar index (DXY), which gauges the currency against a basket of other major currencies, has shown 5.5% growth since mid-April and saw it peak last weak at the best levels seen in 12 months. Following Trump's comments that went against the ECB's predictions of another 2 interest rate hikes this year, all major currencies made gains against the Dollar towards the end of last week. The USD report below looks into the factors impacting the Dollar currently, and the possible developments depending on the outcomes of further trade tariffs. The table below shows the difference in US Dollars you could have achieved in return when buying £200,000.00 during the high and low points of the past week.

Currency Pair% ChangeDifference on £200,000
GBPUSD-2.50%$6,480

The USD’s dominance has been impressive to say the least, up against all major currencies since the start of the year. The Dollar index (DXY), which gauges the currency against a basket of other major currencies, has shown 5.5% growth since mid-April and saw it peak last weak at the best levels seen in 12 months.

In a report published by global brokerage Morgan Stanley, the Greenback is ‘expected to remain bullish until the middle of next month’, which suggests the timing of GBP/USD transfers will be key to capitalise on any favourable movement in the short term.

US Dollar to face volatility due to further trade wars

Global Trade wars intensify

The development of intensifying global trade wars, primarily between the US, China and Europe will be closely monitored by investors and will therefore be of interest to those planning transfers of the associated currencies involved.

US President Trump indicated at the end of last week that he is prepared to put further tariffs on all Chinese imports which would be worth around $500 billion Dollars per year and these comments followed a surprising attack earlier in the week on the Federal Reserve which claimed that further increases to interest rates, risked undermining his efforts to strengthen the economy.

 

The FED has made clear that interest rates are expected to rise a further 2 more times this year which would suggest the president’s comments could be a sign of potential friction to come. 

Trump also suggested that both China and Europe have manipulated both currency and interest rates which has put the United States at a disadvantage.

The response from these comments saw all major currencies gain some ground against the USD going into the weekend.

Key US data this week

It will be a busy trading week for the greenback, with a variety of economic releases throughout, that will influence movement of its major currency pairings.

The data will see Housing data released on Monday and Wednesday, which will highlight existing and new home sales for last month. The releases are both expected to show growth which will reinforce expectations of USD strength.

There will be Markit industry sector data released on tomorrow which is expected show a general expansion, but the figure is expected to show a slight drop from the previous data last month.

Jobless data will be released on Thursday, and the continued claims are expected to be in line with the previous, however initial jobless claims shown for last month are expected to show a slight increase.

previous, however initial jobless claims shown for last month are expected to show a slight increase.

The main attention will be on Friday afternoons GDP and inflation data. GDP is expected to show an increase of 2%, whilst inflation a reduction in 0.5% which could influence the decision to raise interest rates in the coming months and in tern USD strength in the short term.

There is therefore the potential for USD volatility this week, so those planning transfers could benefit from acting sooner rather than later.

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.