Is it time to sell my USD position?

Those clients holding USD remain buoyed by some of the best selling levels we’ve seen in the past 30 years. It is a unique position that clients now find themselves in and for that for reason I would certainly not be gambling on another aggressive US Dollar spike. Despite Sterling’s current problems the downside risk for any clients holding the greenback certainly outweighs any further upside gains in my opinion and for that reason I would look advantage of any short-term positions, or protect any longer-term trades with one of our forward contracts.

GBP/USD rates did realign slightly during yesterday’s trading and despite the Pound struggling to hold its position above 1.30 for any prolonged period, we did see it hit a high of 1.3027, having started Tuesday’s trading under 1.29 on the exchange. The US Dollar has benefitted from a recent interest rate hike by the US FED and a cut by the BoE. This alongside the general downturn in the UK economy has helped push rates to their current levels but I’m not convinced this trend will continue at the same pace.

Looking at this week’s economic data and poor US inflation figures contributed to yesterday’s drop but it is today’s Federal Open Market Committee (FOMC) minutes, which could shape USD exchange rates for the coming days. These minutes hold a huge amount of relevance for investors, as they give us a key overview of the current financial & economic conditions inside the US and as such could cause extreme volatility on US Dollar exchange rates. There is also employment data out on Thursday, so expect further movement on GBP/USD rates over the coming days.

Political tension could cause USD to weaken

The political battle in the US is getting ever more gripping and it looks as though the coming months will bring many more twists and turns, as the race for the White House intensifies. At the very least it should bring about some entertaining anecdotes, with Republican leader Donald Trump showing no signs of changing, or even softening his gung-ho attitude. This is despite repeated calls from senior members of his own party to do so and even falling poll numbers seem to be doing little to dampen his mood.

Withdrawing personal opinion the currency markets do not view a Trump Presidency as a viable or positive outcome and as such we may find that the USD start to lose value as we head towards Novembers elections. Even another interest rate hike could be offset by Political tensions and it is just another reason that clients who are holding USD, should remove any unnecessary risk and snap up the current levels.

For questions on todays market report or currency exchange in general, our brokers are available to take your call until 6pm today on 01494 725 353.


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