The US Federal Reserve Bank will release their meeting minutes on Wednesday evening providing insight into their latest policy meeting where rates were kept on hold. Today's USD report looks into the ways the Dollar could be impacted by this with the expectation for further interest rate hikes in the not to distant future. The table below shows the range of exchange rates for the past month, showing the difference in return you could have achieved when selling £200,000.00.
|Currency Pair||% Change||Difference on £200,000|
A strong interest rate will make a currency more attractive to hold and the predicted further hikes are supporting the currency.
The rising US dollar in recent weeks has been quite impressive rising 5 cents against sterling in just 2 weeks.
The US Dollar looks set to continue its form although Wednesday could potentially upset the trend. Markets generally think it is a given we will see an interest rate hike at the next Fed meeting in September, however there are concerns over the longer term.
This is the second longest period of economic expansion in the United States since WW2, prompting some analysts to question how much further the economy will go and the currency can rise.
For now the US Dollar appears unstoppable but any signs from the Fed that they are now contemplating an end to the current boom in their economy, could stop the US Dollar in its tracks.
Thursday begins the Jackson Hole Symposium, an economic forum where global leaders gather to discuss economic ideas and plans for the future. Jerome Powell has inherited a strong economy and has not had to make any key decisions which would allow him to be significantly judged.
US economic policy has global implications as the currency crisis in Turkey showed last week. Markets will closely watch the Federal Reserve Chair’s speech this week, once again with the US Dollar and the US economy performing well, the surprise would be if there is any significant deviations from the all round positivity surrounding the US Dollar.
Against Sterling, which is weakened over Brexit, fears there does seem plenty of opportunity for further gains. The US will at some point reach a peak of interest rate hikes, a point where to raise them any further could lead to a recession.
Donald Trump’s economic plans have so far only helped the US economy to grow but this strength will not last forever. In the short-term at least further gains seems probable and clients holding the pound to buy US Dollars should probably not be taking on too much risk.
A no-deal Brexit could see GBPUSD levels hit 1.10 according to some analysts, a very real prospect looking at how negotiations are currently unfolding.
If you are looking to buy or sell the Pound against the US Dollar get in touch to discuss your plans as it looks like a busy week ahead.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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