The US dollar has weakened today following the results of the US Mid-term election. The Democratic Party won in the House of Representatives but suffered some losses in the Senate. The net impact from this is that Donald Trump will not be able to pass legislation as easily as he would have previously.
One of the reasons for the strength of the US dollar in the last couple of years has been the expectation that President Trump’s policies will fuel further economic growth, and lead to higher interest rates which make the currency more attractive to hold.
Is now the best time to buy US dollars with pounds?
Those buying US dollars with pounds are now looking at some of the most attractive rates in a few weeks. This is also down to Pound strength following the latest Brexit news, with there now being quite a high expectation a deal on the UK’s exit terms will be finalised soon.
Whilst there is potential further upside in the pound to dollar exchange rate, it does feel much of the good news may now be priced in. Expecting a huge jump higher might now be quite difficult in the absence of anything specifically new to drive the rates. The shock would be if Brexit talks now fail, that could easily see the pound dropping by 2-3 cents if confidence falls.
Will the Federal Reserve raise US interest rates?
For the rest of the week we have the US interest rate decision, being held tomorrow because of the election results today. The US Federal Reserve will make a decision on whether or not to raise interest rates, it does seem they are very likely to confirm a December rate hike, the 4th this year.
Despite the renewed optimism on sterling boosting GBP/USD rates, I still feel the US dollar will remain strong. The election is not completely bad news for Donald Trump and the US economy should carry on performing very well, attracting investment.
If you have a GBP/USD transfer and wish to discuss the exchange rate please do get in touch, I would be happy to discuss the outlook with you. Fill in the form below to send me a message.