The US Dollar has remained strong despite weak data out of the US yesterday.
The confidence index measures US consumer confidence and during June it fell from 128.8 down to 126.4. This did little to dent the greenback’s strength and personally I expect to see the US Dollar become a bit stronger in the upcoming weeks for a number of reasons.
Oil prices are remaining high at the moment as the owing to a number of reasons, and as oil prices are denominated in the greenback (USD) the currency is remaining strong. There are production issues at one of Canada’s oil sands production plants and there is uncertainty surrounding exports from Libya at present. US President Donald Trump pushed for sanctions to stop importing oil from Iran who in-turn tried to limit supply and this has pushed oil prices higher.
With the on-going issues surround the commodity I expect the USD to remain strong, as we’ve seen for much of the year. The US economy is also firing on all cylinders at the moment with a further two-interest rate hikes expected before the end of the year, and there have already been 7-interest rate hikes from the US Fed Reserve Bank in the last 18-months and these have come at a time that other major economies are weary of making changes.
Later in the year there will be a change of personnel within the Bank of England, as the bullish Ian McCafferty will be replaced by Jonathan Haskel. This could be important as it may delay the anticipated interest rate hike from the BoE, as McCafferty was one of the 3-voting members that hoped to raise rates immediately. If Haskel sits in the fence as is usual with new members, the voting patterns may not be so bullish and the hike may be delayed.
This is likely to limit the Pounds upside, and the currency has lost over 8% against the US Dollar since the BoE decided against raising interest rates as they were expected to earlier in the year. The fall from around 1.4350 down to the current levels in the 1.32’s equates to a large amount of money on currency transactions, which is why it’s important to keep updated on current affairs.
There is quite a busy end to the week for US related data covering personal expenditure, jobless claims and also Gross Domestic Product. If you wish to be updated in the event of a major market move, do feel free to register your interest. You can get in touch to discuss this further here.