Following on from an extremely strong US jobs report on Friday where Non-Farm Payroll data exceeded analysts’ expectations, the US Dollar continued its strong run against the Pound, testing the 1.30 barrier.

This is due to a combination of the Pound weakening and the Dollar strengthening. Friday’s Non-Farm Payroll report would have helped to strengthen the hopes for a US interest rate rise in the coming months, which in-turn would have strengthening the USD which has been the trend since Friday.

The Pound is currently out of fashion especially since last week’s Bank of England decision, during which a vote of 6-2 to keep interest rates at current levels was recorded. This was a change on the previous month’s decision of 5-3. The change was largely due to new voter Andy Haldane not wanting to disrupt things just yet.

Tension in the US

Whilst the US economy remains strong, current politic uncertainty in the US, and the growing fears of conflict with Russia and also North Korea are keeping the Dollar under pressure.

This week will be heavily influenced by the latest developments surrounding the Trump administration, which vowed to make more reforms to the tax system last week. Of even more importance will be the latest developments surrounding North Korea, which at the time of writing has said it intends to retaliate against the US over recent sanctions imposed due to the country’s nuclear missile program.

I think that the situation with North Korea could be an extremely important event moving forward that could heavily impact exchange rates. Conflict can cause significant movement in exchange rates – normally causing weakness. I think that this, combined with the political difficulties the US is facing with its own government, could mean some long-term weakness for the US Dollar.