The US Dollar found further support yesterday following positive GDP figures as well as better than expected jobless claims. The US economy continues to go from strength to strength with building pressure on the FED to act by raising interest rates.
During Yellen’s speech on Wednesday, she made a statement to congress that the overall mood amongst policymakers who are ‘very pleased with how the economy is performing’. Yesterday’s GDP figures will add further optimism amongst policymakers.
That being said, the upcoming US elections will occur within weeks of the FED’s next interest rate decision, and whilst the FED are independent of politics its unlikely that an interest rate rise will occur during any US election, especially this one.
With this in mind, there could be a window of opportunity for US Dollar buyers to take advantage of.
US Dollar weakness likely during US elections
Political events tend to create volatility for the currency it relates to and this year’s US elections will likely cause more volatility than normal. If the FED are gearing up for a hike it is likely to be in December or early next year. What this means is US Dollar buyers could have a window of opportunity between the US elections and a FED interest rate raise.
As yet, the US Dollar has not hit the storm but with polls suggesting Trump could have a chance at the White House we could see similar movements seen during the UK’s Referendum earlier this year.
Janet Yellen to quit if Trump takes power?
It has been suggested that Janet Yellen may resign in the event Trump takes Presidency, this follows comments from Trump about the Chairlady.
Paul Ashworth, chief U.S. economist at Capital Economics made the comments following Trump’s rant about the US economy remaining in a ‘Big, fat, ugly bubble’. It would not be the first time Trump has criticised the FED’s handling of the economy in recent months.
There remains a lot of uncertainty ahead for the US economy but in any event, whilst the US Dollar remains at a 30-year against Sterling, we could see some big movements as we approach October and into November. Similarly to the Brexit vote, we could see some major figures resign as a result of a Trump Presidency. Given that he wants to limit trade with China if elected, a Trump victory could have ramifications on the Global economy.