The US Dollar has lead the pack this year, but given the narrow lead for Clinton over Trump in the US elections could Dollar weakness be emerging?

Will GBPUSD fall below 1.30 again?

The US Dollar has continued to remain extremely strong against both the Euro and the Pound as the US economy continues to show signs of positive growth. However, last week’s jobs data came in marginally lower than expected but still positive and although this means a US rate hike next week is now less likely the news coming out of the world’s leading economy is still very strong. The US presidential election are now just less than 2 months away and due to take place on 8th November. Currently Hillary Clinton is leading Donald trump but it’s getting closer.

Predictions from one of the most recent polls has shown that Clinton is leading with 42% of the vote, Trump at 39% and Libertarian Gary Johnson at 8%.

Some people have suggested that owing to the uncertainty of who may be the next US president could cause weakness for the US Dollar. However, typically in times of global uncertainty and political instability this could end up seeing Dollar strength once the vote are counted.

In the short term the Dollar is likely to be affected by a number of data releases coming this week. On Wednesday the US announces both Import and Export data for August. With US trade representing as much as 20% of world trade this can often have a big bearing on GBPUSD rates.

US Retail Sales to cause potential rate hike in the US?

With Thursday bringing a huge amount of data from both the UK and Eurozone the US will also release Retail Sales for August. Another positive announcement for the world’s leading economy could see the Dollar strengthen as it highlights how strong the US economy is performing and therefore could put further pressure on the Federal Reserve to look at raising interest rates.

There is an argument to not increase interest rates whilst the US election campaign is taking place. However, the Fed are independent and this should in theory make no difference as to their decision. Personally speaking I think they are ready to hike interest rates but I would be surprised to see any rate hike before the end of this year.

Therefore, if you’re buying US Dollars and you’re concerned about the impact of the US election later in the year but don’t have the full availability of the funds you may wish to consider buying a forward contract which allows you to fix your exchange rate for a future date thus eliminating the uncertainty of where exchange rates may move.

The upcoming US elections could present opportunities for buying US Dollars, why not speak to our team on 01494 725 353 to discuss further?


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