The US Federal Reserve cut interest rate levels for the first time in a decade last week, with a reduction of 25basis points, to 2.25%.

The Fed’s decision to cut levels had been widely anticipated, with many reports suggesting that it was a precautionary measure in response to the slowdown in growth coming from the nations key trade partners China and Europe, in addition to the uncertainty surrounding the US President’s global trade disputes.

The President has generally been outspoken when discussing his stance on interest rate levels and has called for further cuts to be made before the end of the year.

In a series of tweets following the announcement of the Fed’s latest cut, Trump announced he would be imposing additional 10% tariffs on $300bn worth of Chinese imports beginning September 1st and stated he was unsatisfied with the pace of negotiations between the two nations and it would be necessary to protect the country from trade-policy risks.

According to Reuters, the presidents latest move has meant that there is now over 80% chance that there will be a further interest rate cut next month, which could in turn influence USD currency markets such an outcome is priced in.  

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Economic data this week

As last week’s economic developments influenced volatility for USD markets, investors could be anticipating the outcome of key economic data releases this week, as they could influence market movement.

Towards the end of the week, employment data will be released which will be followed by inflation data in the form of the Producer Price Index (PPI).  

Current expectations suggest that there will be a minor improvement to the current level of unemployment, whilst the PPI data is expected to show an increase of 0.1% from the last month.

Any deviations away from the expectations in the data could influence market volatility, so for more information on how this could affect an upcoming transfer involving USD, you may wish to contact our trading floor directly and speak to our team of experienced currency specialists on 01494 725 353.

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