With Brexit still the main driver of Sterling exchange rates, many are asking when the best time to buy US Dollars could be. With the upcoming US elections and potential US FED interest rate hike in December, there could be very few windows of opportunity to buy US Dollars before the end of the new year.
GBP USD exchange rates and the US elections
The final live TV debate between Trump and Clinton takes place this week and there could be some US Dollar volatility off the back of it. The US Dollar continues its foothold on Sterling due largely to its safe-haven status. That being said, Donald Trump could be saving his stamina for the last round and whilst Clinton is ahead, anything could happen in next 3 weeks.
Historically, political debates have a tendency to weaken the US Dollar so pay particular attention to exchange rates on and after the debate.
In any event, it is not impossible that Trump could still win the US elections despite what polls suggest. One only has to look at the UK’s Referendum in June to understand just how inaccurate polls can be.
US Interest rate decision
It is becoming widely expected that the FED will hike interest rates in December or early next year, but much of this depends on the outcome of the US elections in my opinion.
If Clinton wins the US elections I am expecting the US Dollar to rally further against Sterling, with further movements if the FED change monetary policy in December. However a Trump victory could prevent the FED from changing policy as they wait to understand the implications of a Trump victory on the markets. Economic data still plays an important part in the FED decision with non-farm payrolls and unemployment rates the 2 big releases to pay attention to.
The FED could raise interest rates in November, but with only a few days prior to the elections this does look unlikely.
With Clinton looking more likely to win this US election and strong signals from the FED regarding a rate hike, it may be advised to buy US Dollars ahead of the results of the US elections. Whilst I do expect US Dollar weakness in the event of a Trump victory it remains a huge gamble to wait for the results.