For the first time in a long time the GBP/USD rate moved well above 1.30 this morning and nearly reached 1.31. After a weekend that looked set to see the US and North Korea come closer than ever to conflict, things seemed to have settled and money has moved away from the “safe” US Dollar. If there was to be an escalation once again then I would expect to see the US Dollar strengthen again.
There is not very much data left for the US Dollar as we approach the end of the week, so there may not be major movement from that source but things can always change. However, next week will be a different story as inflation data along with manufacturing figures will be released which could create volatility. The US Federal Reserve had originally planned one further interest rate hike this year however there are concerns that it may not happen now. Economic data was strong at the start of the year for the US but over the last few months that has started to wobble.
There has been a slowdown with inflation, last month was the first in 6 months that it didn’t drop. Whilst economic performance with regards to jobs and unemployment had improved, falling inflation suggests this won’t continue. Having made changes to help boost the economy, Donald Trump and the Federal Reserve will need inflation to pick back up in order to see progress. President Trump has made several changes to economic policy to accommodate business growth and if there isn’t any sign of results he could well find himself under pressure.
Next week if we do see inflation fall again then we may see the GBP/EUR exchange rate moving back towards 1.32.