Next week’s GDP release should be an extremely closely watched event with anyone with a USD requirement. A lot of emphasis this past week has been on whether the US have been too aggressive in the policy tightening and if the US economy is actually strong enough to warrant an interest rate hike.
More worrying signs have emerged this week as Brent oil entered into bear territory and with that followed whispers that inflation in the United States could creep below the target previously set. Inflation is a key barometer for any country’s economy when choosing to increase or decrease interest rates.
I personally think that the Dollar could start to weaken if the next rate hike, which was first rumoured to be in September gets pushed back to December.
Next week we are expecting US income and spending figures to be released alongside GDP, which will give an insight into the overall health of the US economy for the first quarter. Furthermore, FED Chair Lady Janet Yellen is due to speak in London on Tuesday.
After raising interest rates last week, the market will be keenly awaiting any comments which point to further spending, however given the current global outlook and recent events in the US I would expect her to take a more reserved tone which could weaken the Dollar ever so slightly. At present, the Pound remains under strain from political events so any weakness should be taken advantage of in my opinion.