This afternoon the much-anticipated US Durable Goods data was released. The figures were considerably better than expected, along with a high reading on the Manufacturing PMI data. There has been a lot of speculation surrounding a possible US interest hike in December, with the expectation now that the Federal Reserve will raise interest rates in the near future.
During a speech last week Janet Yellen suggested the rate hike was coming soon, data permitting. A strong raft of US economic data so far has certainly made the decision to raise rates look more likely. The US Dollar has continued to strengthen despite the expectation for a drop in it’s value if Donald Trump was elected US President.
Could Trump affect the Fed’s decision on interest rates?
Donald Trump made a major announcement yesterday, suggesting that when he becomes President he will withdraw the US from the Trans-Pacific Partnership. This announcement has not been met with much objection, which suggests he’s not alone his thinking. However, the worry for the US economy is what will happen following significant trade deal changes. If the US economy is faced with drastic changes in trade deals it wouldn’t surprise me if the Federal Reserve wait to decide what to do.
Over the next few weeks the build-up to the interest rate decision will almost entirely dictate the US Dollar’s value. If there appears to be any doubt of a hike, I believe the Dollar could start to lose ground very quickly. Alternatively, if there’s an indication interest rate will rise the GBP/USD exchange rate could move back towards 1.20.
Current GBP/USD exchange rate
At the time of writing the interbank rate for Pound to US Dollar is 1.24, up 1 cent from the low of today’s trading session.