The economy seems to be performing well in the US, with unemployment down and Gross Domestic Product (GDP) data showing healthy gains. However, today the latest inflation data does not seem to reflect the current growth in the US and as such creates a problem for the Federal Reserve and could influence the decision on when to raise interest rates. At present, the likelihood of a rate hike before the end of the year in the US is between 30 – 40 percent.

Currently the US Dollar seems to be holding steady, despite a large number of factors that could easily cause Dollar weakness at any given moment. President Trump has recently vowed to shut down the Government if Congress failed to vote on lifting the debt ceiling and to finance a wall with Mexico. This would most likely cause the US to fall out of favor with investors. Currently, Hurricane Harvey is likely to take the spotlight as Congress and the Government address the issues caused by the natural disaster.

President Trump also has the capability of moving the Dollar through his tweets, which yesterday caused investor sentiment to shake as he tweeted ‘it’s time to stop talking with N.Korea!’

So, whilst the US data of late has been extremely positive (retail sales, consumer confidence and GDP all beating expectations), external factors are likely to heavily weigh on the Dollar in the short term and for this reason I can’t see the Dollar gaining much more value against the Pound and the Euro.

Tomorrow’s payroll data for the US is likely to paint an even better picture of the US economy, so keep your eyes peeled as to whether this will improve the chances of a rate hike before the end of the year.