At 1:30pm today the latest Consumer Price Index will be released for the United States and is expected to show no change from this time last year residing at 1.8%. The US Federal Reserve Bank have been following an aggressive strategy to raise interest rates on multiple occasions in the last year and there could be more. If inflation does start to pick up faster then there could be another hike on the cards before the end of the year.
However, the US has started to slow down on the economic data front with data releases in the past few months falling short of expectations. The GBP/USD exchange rate has started to rise back up above the 1.30 mark in the past week hitting a 1.32, 9 month high recently. If the figures in this release are below the forecasted level then I think the US Dollar could have swift losses, which could present a good opportunity to buy US Dollars.
North Korea Factor
The US Dollar is considered a safe haven currency. This means that when there is trouble across the financial markets investors will move their currency to the Dollar (amongst a few other currencies). The reason for this is that so many commodities around the world are priced in Dollars and the volumes are so great it’s unlikely the value will collapse.
I would argue though that if the US end up in conflict with North Korea that could have a significant effect on the strength of the US Dollar.
I believe that the interest hikes would be put on hold for the near term and US economic data could weaken as uncertainty sets across the country. In previous wars American territories have not been under immediate threat but that wouldn’t be the case.
Whilst this is an unlikely turn of events the US Dollar could be coming in for a rocky time in the next few months.