US and Russian tensions continue to grow due to President Trump threatening to pull out of the intermediate range nuclear forces treaty, which was put in place in 1987 as the cold war came to an end. Russia has responded saying it would be forced “to take measures” if the US began to develop new missile systems. Donald Trump has used the fact that Russia tested a banned cruise missile in recent years as justification.
US Dollar strength – Flight to safety
This has caused US Dollar strength as investors seek safe haven investments during times where we could see conflict. The US dollar is not only considered a safe haven investment, it also offers impressive returns. Ten year bond yields are currently at the highest levels for years and interest rate levels are impressive, currently sitting at 2.25%. There is also the potential for a further interest rate hike by the end of the year.
The Russia / US situation along with the US / China trade war are proving beneficial for the dollar and when you combine this situation with Theresa May potentially losing her position it does not bode well for the pound. If you have to move short term it may be wise to take advantage of current levels.
US GDP data could affect Pound to US Dollar rates
US Gross Domestic Product figures are released on Friday and could influence GBP/USD exchange rates. Data is expected to land at 3.3%, which is quite a fall considering last years Q3 came in at 4.2%. If the data lands inline or worse than expectations this could influence the Federal Reserve’s interest rate plan. It could mean we see a less aggressive strategy to hiking rates which could cause the US Dollar damage.
Personally I feel due to the global economic uncertainty created predominantly by the US the Dollar will benefit, however if a Brexit deal does come to fruition which includes access to the customs union we could see some substantial Sterling strength.
If you need to exchange US dollars and would like further information on the events that could affect exchange rates, feel free to use the form below to ask a question. I’ll be more than happy to get in touch personally and discuss your query.