GBP/USD – US/Mexican NAFTA Agreement Helps Solidify the USD’s Position

GBP/USD rates have remained flat throughout Tuesday’s trading, with the USD finding plenty of support around 1.29.

The breaking news yesterday was that the US and Mexico have agreed to revamp the NAFTA agreement, hailing it as a “really good deal” for both countries. The news is likely to help solidify the current good feeling around the US economy, which continues to show impressive signs of growth.

The USD is benefitting from this good feeling, with investors flocking to it for a variety of reasons. With interest rates on the up and a potential for another two rate rises before the end of the year, the prospect of greater yields is obviously attractive to those looking for a return on their investments.

Funds are also being moved to the greenback following a slowdown in global trade (ironically this is at least in part to do with President Trump recent trade tariffs on China and the Eurozone), as investors always see it a safe haven for their funds. This is due to the fact that the USD will generally hold its value better in times of economic uncertainty, than more riskier assets and often commodity based currencies such as the AUD, NZD or CAD.

These reasons combined have helped propel the USD to its current levels against Sterling, providing those clients selling USD with some excellent value over a prolonged period.

The US FED remain committed to their current monetary policy stance and will look to continue raising interest rates despite President Trumps current aversion to it. If the expected rises do occur they will likely to help solidify the greenbacks position.

There is of course an argument to be made that the markets are currently factoring in a further two rate hikes this year, so if for any reason these do not occur, then we could see the USD potentially lose value as USD currency positons are sold off as a result.

To discuss the above factors in further detail to know how they could impact your currency transfer, you can email me directly here and I’ll be happy to discuss your queries.

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