The dollar remains under pressure from both the Pound and the Euro at present. Yesterday GDP for the UK caused the pound to rally against a basket of currencies, including the dollar. This has led to the UK’s Bank of England potentially opening the door to a rate hike next week, however the next move for the BoE is not yet clear, I feel this is a get out of jail free card for the UK, and Mark Carney’s likely dovish tone will reiterate this in my opinion.
The ECB has had an effect on the dollar this week as it looks to cut its asset purchasing scheme today, likely to be announced from 12 BST onwards. Many investors have looked to buy European bonds ahead of the decision and as the world’s most commonly traded pair, the USD has lost ground against the Euro because of this.
Two things have the capability of moving the dollar now – data and the question over who will be the next Federal Reserve Chair. The data from the US is likely to be positive, therefore strengthening the dollar, bar the unemployment data today which is likely to have been affected by the two recent hurricanes which have impacted people’s ability to get to work.
What’s more interesting is that this same factor is yet to be felt by other areas of the economy, the US durable goods data – often seen as a measure of a healthy economy as it is long term business investment, posted healthy gains yesterday. The next release of importance is tomorrow, when GDP data is expected to hit 3.0% and more importantly opening the door to a succession of rate hikes in 2018. The next Fed Chair is also of importance – Donald Trump is likely to pick someone with a hawkish attitude regarding rates that is likely to strengthen the dollar even further when the time comes. With political uncertainty weighing on the pound, the USD has the potential to make serious inroads against sterling in the up and coming months.