The US dollar has had a particularly strong week and start to the year, making consistent gains against a number of its major partners and reaching record levels. In particular we have seen the strongest level against sterling in 18 months, and just over nine years against the euro.
This has come mainly as a result from continued speculation over potential interest rate rises in the US, given its recent run of positive data. A small blip was seen at the start of the week, as its non-manufacturing Purchase Managers Index (PMI) figure showed a larger than expected drop. This failed to dampen the US dollar’s overall run, however, especially as the more influential independent non-farm employment change figure came out ahead of expectations. These data releases all came out ahead of Wednesday’s meeting minutes from the Federal Reserve, which in effect still showed some sitting on the fence on the subject of interest rates. The Fed said that they were unlikely to go up before April, and still voiced concerns over knock on effects of problems from elsewhere such as the Eurozone.
Yesterday then continued to add to the dollar’s strength, as the unemployment claims data came out marginally ahead of expectations, adding further evidence in support of raising interest rates. Today sees the release of an important monthly figure, the official non-farm employment change, which given its status creates opportunity for market movements.
If you regularly make payments to or from the US, call your trader to find out how the strength of the US dollar affects your currency exchanges.