The Pound extends its losses against the US Dollar during the early hours of the trading session, as markets prepare themselves for the anticipated Spring Budget from the Chancellor Philip Hammond. While the Pound regained some traction following positive and uplifting comments, the negative trend looks set to continue once the dust settles on Hammond’s proposed plans.
The UK economy remains one of the largest growing G7 countries; despite the controversial decision to leave the EU last year, and at the surprise of many economists who predicted a gloomy future for the UK.
However, the UK’s future still remains uncertain and despite a clear resilience to the vote last June, markets have little knowledge of what will unravel in the months ahead.
On the other hand the US Dollar is a much safer bet for investors, not least due to the clear indications of a strengthening economy but the sheer thought of a higher return once the FED continue their streak by increasing interest rates.
US interest rate hike highly likely in March
US Dollar bulls are out in full form this month as the FED continue to dangle carrots. The probability of the FED raising interest rates in March is above 80% according to some analysts, as the continuous flow of strong economic data supports its case.
With Trump on a spending spree the FED will no doubt have to play catch up and it could be in the form of further hikes in 2017, wetting huge appetite for the US Dollar at a time of political uncertainty throughout Europe.
This in turn will drive more funds away from the Pound into the US Dollar as investors weigh up their decisions ahead of the Article 50 deadline later this month. Those with a US Dollar buying requirement may be prudent to act sooner rather than later. Government may invoke Article 50 at any point here onward which in turn could drive the Pound lower against the Dollar.