Good afternoon,
Despite the government shutdown the dollar managed to claw back some of the ground it lost to the pound during trading today. Since Tuesday morning the GBP/USD exchange rates have been pushing towards $1.6250 but following some weaker than expected UK data and positive unemployment news from the U.S, rates dipped back below $1.6170.
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With the saga surrounding the U.S continuing and with no end to the shutdown in sight the door was open for the pound to push up even higher today. However, with the Halifax House Price index (which measures the change in price in houses financed by HBOS) and UK Services PMI both missing initial forecasts Sterling was could not even hold its current level and slowly slipped over the course of the morning.
The dollars gains did not stop there as we witnessed another drop for the GBP/USD cross in the afternoon. The U.S weekly unemployment claims ,which show the number of people who have filed for unemployment benefit, came in 7K under the predicted level to bring exchange rates down to the low of the day.
So what is round the corner?
So far the U.S government has only implemented a partial shutdown which has left 700,000 people out of work with little chance of claiming back pay. The longer the shutdown continues the more impact it is going to have on rates of exchange.
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As it stands national parks, tourist sites, government websites, office buildings, have been closed which includes some of the companies that release U.S economic figures. Tomorrow should have seen the release of the non-farm payroll numbers, which normally cause some huge swings for the GBP/USD cross, if the data can not be released it may cause the dollar to weaken even more.
The new budget is not the only issue government officials currently face, there is a potentially more dangerous prospect on the horizon which could leave the U.S unable to meet their financial obligations.
On the 17th October the States will reach their debt limit which will basically leave them with no cash to pay their bills. Unless Congress can reach an agreement to raise the debt ceiling we may see the worlds largest economy default on their payments. This would be catastrophic for the U.S and the dollar and if the worst was to happen we would see the dollars value plummet in a matter of minutes.
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