The US Dollar's recent run has been put to the test following a string of poor economic data last week and Trumps confusing u-turn on policy. With further interest rate hikes still on the cards this shaky period for the US Dollar may just be a bump in the road.
Yesterday saw the US Dollar loose ground against the majority of it’s currency counterparts with Sterling the main benefactor. Cable jumped by almost 2.5% to hit 6 month highs at the 1.29 mark courtesy of UK Prime Minister Theresa May’s u-Turn on calling a general election in a bid to drive political stability going into Brexit talks with Europe.
This was particularly well timed for GBP/USD rates as the greenback was still licking it’s wounds following disappointing releases from the housing market. Investors use real estate figures as guidelines for the health of an economy long-term and the fall in the number of single family homes built did very little to wet investor appetite.
Both the snap election and the release of negative economic data made for quite a dangerous cocktail. Sterling’s rise over the course of the afternoon made a $250,000 transfer almost £5,000 cheaper.
With a seemingly consistent trend of negative data coming out of the states and the current unrest in North Korea weighing on the greenback, there is every chance that cable could break through the 1.30 mark for the first time since September 2016. Since Trump’s election last year, investors had been flocking to the US Dollar, sensing opportunities of greater and surer returns on investment as a result of the health care changes and tax reforms promised by the Trump administration.
However, as these promises haven’t come to fruition and geopolitical difficulties continue to occupy the top of Congress’s priority list, the markets are gradually beginning to lose interest in the US Dollar in the short run, with Goldman Sachs the latest figurehead to reevaluate it’s long stance on US Dollar dominance over its major currency counterparts.
This all being said, the promise of multiple rate hikes from the Fed remains and I am confident the US Dollars value will surge once more in the build up to the next hike in the months ahead. Similarly, with what happened prior to the previous hike, I expect investors to price the hikes in well in advance and wouldn’t be surprised to see sterling’s current surge short lived.
As a result, If you have a pending USD buying requirement it may be wise to capitalise on these 6 month highs before sterling’s current spike is reversed.
For those looking to sell US Dollars, be sure to keep a close eye on the markets this Friday afternoon with a long list of real estates commodity sales and manufacturing data due to be released The majority is on track for slight progression but any improvements will almost certainly create short term spikes to be made the most of.
For US Dollar buyers, a window of opportunity has opened with GBP/USD now sitting at multi-month highs. Call us on 01494 725 353 to capitalise on these recent gains.
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