Sterling started the week on the front foot against the dollar following improved investor sentiment as Brexit talks seemingly progress. However, momentum does seem to be with the US dollar now as GBP/USD interbank rate has fallen below the recent 1.31 highs, however this could quickly change as we progress through the week.
|Currency Pair||% Change (Month)||Difference on £200,000|
On the USD side, movement is likely to be driven by two events with both occurring on Friday; Consumer Price Index data and a proposed increase on tariffs on $200bn worth of Chinese goods. Federal Reserve Chairman Jerome Powell’s recent comments regarding subdued inflation within the US economy are likely to be tested.
Stronger than expected inflation data is likely to reinforce the opinion that the US economy is not near maximum output and could support further interest rate hikes in the future. Although this could be someway off, clients buying the USD may want to get in touch with their account manager to discuss their options before Friday’s data release. Other market movers involve Purchases Producer Index on Thursday and Trade Balance Figures. Trade is a key part of Gross Domestic Product which can influence the dollars value, although this could be overshadowed in wake of other events this week.
Following an impressive end to April for the USD, Trump very quickly brought things down a peg as he reignited the feud between China and the US and shocked investors around the globe. Donald Trump has said that he will raise tariffs on $200bn worth of Chinese goods on Friday. Recent reports suggest that the US is now accusing China of backtracking on the deal, stating the trade talks were moving too slowly.
This tension was reflected in the stock market as US stocks fell throughout yesterday, which in turn may feed through in to the dollar as investors change their plans. The proposed tariffs will come into effect on Friday if talks don’t progress by then, Chinese officials are said to be heading to Washington to try and resolve the spat by Thursday. If things don’t improve, the dollar may progress against most of the major currencies due to its safe haven status.
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