Earlier this week the FED announced a hike in their interest rates to 0.75%. This resulted in Sterling sellers getting many more euros for their money however a lot less US Dollar, this is a trend which could easily continue. GBP/USD rates now sit close to 3 cents lower than they were just 10 days ago adding nearly £4,000 on a $200,000 purchase.
Ever since the election campaign result US stocks and shares have been climbing and reaching record levels. This has been as a result of the speculation on changes the President-elect will bring in once appointed. A huge spending spree by the Government on infrastructure projects, creating jobs along with both simplifying and lowering tax levels across the US. This speculation has also had an impact on the US Dollar’s value which has climbed by almost 6% over the last 3 months. With these potential changes in policy within the US, expectations have also changed on how many rate hikes are to be expected in the US and many now expect a further 3 hikes within the next 12 months. As a result, it is becoming increasingly likely that the US Dollar will become more and more expensive to buy in the future. If you have a pending requirement for US Dollar, the Forward contract here has become increasingly popular. This allows you to lock in the exchange rate now for a requirement within the next 18 months for a small deposit.
If the US Dollar was to become more expensive it would also have a knock-on impact on UK PLC pushing up the cost of importing goods and services and therefore pushing up Inflation. GBP/USD rates currently sit near 1.25 and I personally can quite easily see it test 1.20 once more in the coming weeks as President-elect Trump comes into power and probably confirms the policies which all this speculation and movement has been based on. Remembering that the market is always pricing in the most likely outcome.
Currency markets never move in a straight line so timing a transfer will remain key in achieving the best prices. Here our service is aimed at helping achieve exactly this with information of spikes in the market and key days coming up which could improve your situation. In the near term, today we have a number of data releases scheduled for the US market, including housing data and the infamous US oil rig count. These are expected to show some contractions so potentially giving USD buyers a short-term opportunity to get a better price this afternoon compared with this morning.
The potential for further US interest rate hikes next year could work against US Dollar buyers, you may wish to protect your position now by getting in touch with your broker on 01494 725 353. If you have any questions regarding this report, please email me personally at email@example.com.
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