The US Dollar has continued to challenge the lows recently and with little to support the Pound we could even see GBP/USD rates drop below 1.20 again prior to the election due in just less than a month. The recent TV debates have caused huge outcry and Donald Trump’s comments have really landed him in hot water. As the voting begins soon I think we’ll see further news stories aimed at the character of both candidates and this could cause even further USD strength against both Sterling and the Euro.
My reasoning is that a currency typically weakens on political uncertainty but at the moment as the US Dollar is used as a safe haven currency in times of political uncertainty this is why we are seeing the US Dollar remain strong.
Indeed, the US are also considering raising interest rates at November’s meeting and with tonight FOMC minutes due to be released any suggestion that the Fed are getting ready to hike rates could see further US Dollar strength vs Sterling. My personal suspicion is that the Fed will not change rates until after the election as to do so could cause too much volatility and although they are independent from any political interference I would be surprised to see any rate change before the end of this year.
Whilst economic data in the UK is thin on the ground this week the US will release a whole host of data both on Thursday and Friday. Initial Jobless Claims are published tomorrow with the expectation of another positive data release then I expect GBP/USD exchange rates to fall.
On Friday US Retail Sales are released for September and with Fed Chairlady Janet Yellen addressing the market at the end of the week I think we could see GBP/USD rates challenge 1.20 on the Interbank level. It is often said that what comes down must go up but with little positive news on the political front in the UK and continued strong data in the US I think we could see rates go lower before they recover. Therefore, if you’re thinking of buying USD it may be worth organising this prior to the election in early November. If you don’t have the full availability of funds then speak to your account manager about the process of how a forward contract could work for you.
Indeed, since the announcement by Theresa May as to when Article 50 may be triggered including the flash crash of last week GBP/USD rates have dropped by 11 cents from the high to the low or the difference of £14,500 on a currency transfer of $200,000USD which highlights the importance of keeping in contact with your account manager.
Keeping in touch with your broker during volatile periods could help you avoid any potential pitfalls when it comes to a currency transfer. Call us today on 01494 725 353 if you have an upcoming currency transfer you would like to discuss.
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