The GBP/USD exchange rate jumped a cent at lunch time, but all the gains for Sterling were lost come this afternoon. Sterling may have suffered today from very strong economic data for the EU which suggested there is very good business sentiment data.
Tomorrow could be another busy day for Sterling with the Federal Open Market Committee minutes expected to be released in the afternoon. The minutes could well cause major volatility especially after all the talk of an interest rate hike in the next few months. The Federal Reserve have been waiting for positive market conditions and there is a belief that these could have been reached. The current strength for the USD is as much down to the uncertainty surrounding Sterling along with the impending interest rate hike.
US Election could change things
Donald Trump and Hillary Clinton are still tightly embedded in battle for the President’s chair, however it is looking more likely that Clinton could win. Trump has come under tremendous pressure to quit since the latest controversy surrounding comments he made about women in 2005. Despite his comments it appears plenty of the electorate will still vote for him and this could take the race down to the wire.
If Trump or Clinton were to win there is a belief the Fed would still increase rates, however it is yet to be seen if the cautious committee may not hold off to see how new policies play out. Personally I am unsure as to who might be a more pleasing choice for the Federal Reserve, considering Clinton is seen as anti-big business but Trump has some extreme ideas as to how to improve the economy.
I am of the opinion that as we move towards the US Presidential election there could be major volatility in the market and if the FED do suggest they are reluctant to move interest rates until 2017 then US Dollar strength may start to fade.