The dollar has lost ground against most of the major currencies this morning after the U.S government failed to reach an agreement over a new spending plan. U.S officials had until midnight (EST) to thrash out a new budget but failure to do so left the U.S economy facing some very uncertain times. For a free currency consultation click here or call 0044 (0) 1442 892 065
As the news broke the dollar immediately devalued pushing GBP/USD to a 2013 high. Exchange rates rose to $1.6257 the best we have seen the cross since December 2012 and means the pound has gained over 7.5% against the greenback since the start of August. To put the move into perspective a £200,000 trade will now see you receive nearly $23,000 more compared to the same trade booked on the 2nd August.
So what can we expect from the U.S now?
A government shutdown could have some long term effects on the U.S economy, for a start we are still not sure how long the shutdown will last, but the longer it goes on the worse it is going to be. It is rumoured the shut down could last as long as three weeks and if that happens U.S GDP is going to take a bit of a hammering.
If GDP drops (which is more than likely) it will also be bad news for the Federal Reserve as they had been looking for improvements in the economy before they can begin cutting back on their quantitative easing (QE) programme. The longer QE goes on for the harder it will be for FED officials to take the first step which will mean the dollar will take longer to recover.
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It has also left investors airing on the side of caution as it now looks like we will not see any major data releases while the shutdown continues. If investors cannot see how the U.S is performing then they will be forced to put their money elsewhere and with the UK seeming to be on the road to recovery we may see the pound used as a safe-haven which would push GBP/USD exchange rates even higher.
All in all the U.S is now facing a tricky situation and the next few weeks will be critical for the dollars short term future. Lets not forget that on the 17th October the U.S faces reaching it debt ceiling and if that also happens it could leave the U.S unable to meet its financial obligations.
If you need to buy or sell dollars in the coming weeks and want to ensure you are making the most from you transfer, use the link below and complete the contact form or call me directly on 0044 (0) 1442 892 065 for a free, no-obligation consultation.
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