Wednesday evening the Federal Reserve decided to hike interest rates to 1% and stuck with their forecast that there will be a total of three rate hikes this year. As US economic data has continued to impress this year in the form of Non-Farm payroll numbers, unemployment rate and inflation, before the event there was a 85% chance that the FED would hike. As this figure was so high the US dollar has not made any gains against sterling as the decision was heavily priced into the market.
EUR/USD is the most traded currency pair globally and when one currency strengthens the other weakens and vice versa. The Dutch election has certainly provided confidence for the Eurozone which in turn has led to a sell of US dollars to buy euros. We know this as exchange rates increased from 1.06 to 1.0730 off the back of the news that Geert Wilder would not become the next Prime Minister.
For clients that regularly purchase US Dollars they will be aware that they are purchasing at 30-year lows. The golden question many of my clients are asking is whether rates will improve throughout the year and my personal opinion is I think rates are going to edge towards the mid-teens in the upcoming months for three main reasons.
Firstly Theresa May is set to trigger Article 50 this month and I believe this will put further pressure on the pound. Secondly the French Election could lead to a major sell off of euros as investor confidence falls and investors will flock to the US dollar as it’s a safe haven currency. Lastly with the FED predicting another two rate hikes this year that would mean interest rates would be close to 1.5% and again this will attract investment to the US.
Therefore if I were buying US dollars this year my strategy would be sooner rather than later. Get a free quote by calling one of our friendly team on 01494 725 353 or by emailing me here.
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