The US Dollar has strengthened overnight against all major currency pairs, pushing cable (GBPUSD) below its previous 1-year low.
The pair are now trading in the 1.27’s after hitting a new low of 1.2736 earlier this morning, and the USD to EUR rate has also moved dramatically and hit its lowest level of 2018. You would have to go back to June 2017 to see the Euro trading this weak against the greenback, and this shows just how strong the US Dollar is at the moment.
The reason behind the most recent bout of US Dollar strength is being attributed to the concerns surrounding Turkey and its exposure to some European Banks. Investors are concerned that the issues could impact Europe which is why this morning the Lira has dropped by over 7% against the US Dollar, and many European Banking stocks are down also.
The Financial Times has also reported that some European Banks are concerned about how much exposure they have to Turkey.
The US Dollar also strengthened last night after one of the usually more dovish members of the FED Reserve Bank in the US, Evans gave a more bullish outlook regarding monetary policy than people were expecting when he spoke last night.
This strengthening of the US Dollar has come at a time that the Pound is coming under pressure, as Brexit concerns along with concerns surrounding the economy pick up. The Bank of England hiked interest rates to their highest level in the past 10-years just over a week ago, and despite comments from the BoE that there are likely to be further hikes in future the Pound has remained under pressure.
This morning the first estimate for the 2nd quarter of GDP is a at 9.30am and this could result in market fluctuations as the estimate is for just 0.1% which is down on the previous figure. This is key because if the figure disappoints it could show a negative economic output and if this happens I’m expecting to see the Pound slip.
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