US Dollar back to the fore

27 August, 2015

Tom Arnold

The week so far has been tumultuous to say the least with big moves across all of the major currencies as a direct result of the Greek bailout agreement last week and the Chinese Black Monday this week. The Euro has been the big winner, with firstly the Greek bailout giving it a boost and then secondly a raft of investors exiting the Dollar over the Chinese crisis, with their investment going into the now resurgent Euro. This caused a six cent dip in GBPEUR and four cent drop in USDEUR.

Yesterday saw some change to this though, with action in the form of an interest rate cut from the Chinese on Tuesday, filtering into the market and bringing a bit of much needed stability. The Dollar arrested its decline and when much improved durable goods figures come out in the US, actually started to significantly strengthen. Such an improvement in durable goods is seen as an indication that the US GDP figure today is likely to be more positive than anticipated, and the Dollar took that as a big boost.

In the middle of this too-ing and fro-ing between the Euro and the Dollar, the Pound has had a quiet few days with not much data of note to trouble the markets. This has left it at the mercy of its more active major counterparts and so both GBPEUR and GBPUSD have slipped away a bit from the start of the week. Today is unlikely to see a change to this with the only data of note in the UK already done in the form of a Nationwide house price survey, which showed a slight dip month on month, but a slight increase year on year. Sterling analysts will have their eyes focused on tomorrow’s GDP figure as the only major release due this week – could this halt the Pound’s decline?

There are a couple of major US releases this afternoon, with their GDP figure and also consumer personal spending figures due out. Given the durable goods figure yesterday potentially boosting GDP don’t be surprised if the Dollar strengthens further later on as a result.

So if you have a Euro requirement in the pipeline then it has not been a fun few days, and with the Pound struggling for purchase it does not seem likely, baring a surprise from the GDP figure tomorrow, that this will change, so it may well be best to swallow the bitter pill now and book your currency before things deteriorate. If it is Dollars you are looking at then likewise a move before this afternoon’s GDP figure could be a good idea. On the flip side if you have a Euro or Dollar sell to do then great news; rates have moved significantly in your favour and the short term outlook continues to be good!

As ever stay in close contact with your CI account manager to be kept informed of exactly what is happening and how it is likely to affect your upcoming currency requirement.