US Dollar on the back foot

The last 24 hours have seen something of a turnaround in recent trends on the currency markets, with the up until now very strong US Dollar suddenly on the back foot. The conviction of a former Trump aide, together with the testimony from Trump’s former lawyer, indicating Trump was directly involved in the distribution of hush money following recent scandals, has grabbed the headlines, but possibly more telling to the markets, was Trump openly criticising the Federal Reserve’s interest rate hiking policy.

Raising interest rates is one of the most currency-positive things that can happen and if the FED were to change course this would definitely damage the US Dollar’s recent strong position, as we are already starting to see since the comments yesterday. Further indications on this front could be forthcoming this evening when the FOMC releases the minutes from their last meeting – while they would need to have seen into the future to know what Trump was going to say, any indication of delays in hiking or curbing the expected amounts, coupled with Trump’s comments, could significantly damage the Dollar.

On the home front, yesterday saw a joint press conference from Dominic Raab and Michel Barnier, following a recent set of Brexit negotiations, and while there is obviously still a massive amount of differences to deal with, it did seem that there was consensus that a “no deal” was a very bad option and that every effort would be made on both sides to avoid this. It was announced that negotiations would now be non-stop up until the October EU Summit, giving as much opportunity as possible for a deal to emerge.

You would be forgiven for thinking that things are starting to look up, with the US situation suddenly looking better for those looking to buy Dollars, and maybe some overall stability due for the Pound if negotiations with the EU come good. This may well prove to be the case, but the risks are plain to see – Trump has been smeared from all sides ever since his inauguration and is still going strong and Brexit negotiations have looked good before only for tricky issues such as the Irish border to scupper plans. What is more likely is that this bout of optimism provides a good buying opportunity, i.e. a short-term spike on the market. Speak to your CI broker today to discuss your upcoming requirement and to see what your options are.