The pound fell sharply yesterday after the UK inflation rate jumped from 7% to 9% – its highest level since 1982.
When the President was elected late last year the US dollar broadly strengthened on hopes for an improved US economic outlook. With those hopes not panning out so far, USD exchange rates have been struggling to hold their ground.
A mixed run of US data and subdued bets of another Fed rate hike taking place this year also contributed to the US dollar’s weakness.
Whether or not the US dollar is able to recoup recent losses largely depends on how this week’s stream of US reports come out.
The nation is due to release a plethora of influential ecostats, including factory orders, durable goods orders, the Federal Open Market Committee (FOMC) policy meeting minutes, ADP employment change and the non-farm payrolls numbers.
If the minutes from the last FOMC meeting indicate that the Fed still intends to raise interest rates again before the end of 2017 the US dollar may climb.
However, any caution from the Fed (or any cause for concern in this week’s domestic data) could be enough to drive the US dollar to new lows.
Friday’s non-farm payrolls numbers will be particularly important. Strong employment growth and an uptick in average earnings would be US dollar-positive while disappointing jobs figures and lacklustre wage growth would weigh on rate hike expectations and limit demand for the North American currency.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)