WHEN IS THE BEST TIME TO BUY US DOLLARS
The new Fed Chairman Jerome Powell is due to speak on Wednesday and is likely to field questions about the recent stock market fluctuations. This as well a key GDP data released on Wednesday is likely to affect the Dollar’s value. The table below shows the difference in USD you could have achieved when buying £200,000.00 during the high and low points of the past month.
|CURRENCY PAIR||% CHANGE||DIFFERENCE ON £200,000|
IMPORTANT WEEK OF DATA AND POLITICS FOR THE US DOLLAR
GDP (Gross Domestic Product) data will be the real interest this week for the United States and the US Dollar as markets try to understand better the state of the US economy and its future direction.
The US Dollar has been rather volatile lately with continued uncertainty over the knock-on effects of both Donald Trump’s tax plans and the strengthening US economy. Whilst markets believe the US will be raising their interest rates again this year, we are seeing greater concern about the unintended consequences of this.
Jerome Powell, the new Fed Chairman will be speaking to Congress in his first Congressional hearings this week on Tuesday and Thursday. I expect questions over the recent stock market turmoil, and dealing with inflation in response to higher growth. The US Dollar will be sensitive to this news.
US ECONOMIC GROWTH THE KEY CONCERN THIS WEEK
Whilst Mr Powell’s comments and testimony will be important, the US GDP figures on Wednesday will really set the pace.
Markets are expecting an interest rate rise next month and then possibly another 2 but maybe 3 before the end of the year. If the economic data on Wednesday shows the US economy roaring ahead this will make further hikes more likely and should see the US Dollar rise. An important factor in this is that as the US raises interest rates it encourages and reflects confidence in the global economy. Investors are thereby encouraged to take on greater risk and may well seek out higher returns elsewhere causing the US Dollar to lose value.
We have actually seen signs of the US Dollar weakening in 2018 as investors question the longer-term path for the currency and the economy.
The extent however of any serious rise in the value of the US Dollar might be limited. Whilst the raising of interest rates does typically see a currency strengthen, the US Dollar is already stronger on this expectation.
FOR HOW LONG WILL GBPUSD TRADE AROUND 1.40
GBPUSD rates have been trading slightly above and below 1.40 all year as a stronger Pound makes gains on Brexit news. A key driver on GBPUSD this week will be the latest developments in the UK on Brexit. Theresa May will give a Brexit speech on Friday which depending on the performance of the US Dollar so far this week could see us comfortably above 1.40 retesting the 1.44 levels seen this month.
With the pound seemingly heading towards more confidence on Brexit progress and the US Dollar struggling as markets try to value its longer-term price, we could easily see GBPUSD rate nearer to 1.50 at various points this year.
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.