Following the decline of the stock market over the last few days the US Dollar made back some of the ground lost over the last few weeks. Today however the stock markets returned back to the higher levels and the US Dollar remained in the mid 1.138’s against the Pound. This is a positive movement for the currency considering there is uncertainty surrounding when the next interest rate decision will be made.
There has been some optimism of three hikes this year with the first expected at the meeting next month. However, concerns about inflation have raised questions as to whether these hikes will happen that quickly. The reason for the stock market plummeting in the last few days was purely down to market confidence being sky high with data over the weekend. This in turn lead investors to withdraw funds as they were of the belief they would gain more for rising interest rates.
The return of volatility
Donald Trump waded into the debate suggesting that normally when there is good news the stock market rises however now a day’s good news spells a fall in the stock market. Whilst this comment was fairly tongue in cheek it does raise the point that markets are moving in unexpected ways. This past week is the first time there has been much volatility in the last couple of years and no doubt this could increase the volume of trade taking place.
Volatility does of course bring with it more risk, however that also presents more opportunity as there are more extreme highs and lows. Last week there were talks of the US Dollar climbing up to 1.50 however there are now analysts pointing towards the 1.35 region against Sterling along with the EUR/USD moving back towards 1.20. How a single week can change things?