The USD continues its recent trend towards being strong and firm for the Pound to seek new lows, a sign that the markets are showing no signs of weakening, despite the fall in the price of oil. After a stellar day for the Pound, the currency pair is now on its way to fresh session lows, with prices below 1.2 coming into the close of trading.
The Dollar’s rise
Against Sterling has been marked in all but 5 hours this week and with the release of Jackson Hole economic data due shortly, it is expected that this trend will continue. A rise in US non-farm payrolls numbers could see even more pressure put on the Pound and a failure to manage expectations may cause some disappointment – something that has rarely been seen in previous years. The next data release is expected at 11:30 pm GMT and although further falls are likely, they won’t undermine confidence in fundamentals as much as some might hope.
The US Dollar index is trading at 97.15, a gain of 0.73% and the EUR/USD has fallen to 1.1195, a loss of 0.06%.
The GBP/USD
It is currently at 1.1871, down 0.57% on the day and close to fresh session lows at 1.1870, down 0.60% for the session and falling from below 1.19 following an upbeat inflation figure from the UK earlier today showing that inflation had slowed from 2.9% to 2.7%, a very positive development for the Bank of England and Sterling.
The USD/JPY has reached fresh session highs at 104.62, placing pressure on the GBP/JPY, which currently sits at 164.04, down 0.94%.
The EUR/USD
It has fallen from the previously positive territory and is now trading at 1.1237, down 0.13%. The Euro will likely continue to fall as the release of German GDP figures is highly unlikely to impress markets today. The German economy is expected to have grown by 0.3% after growing by 0.7% in the previous quarter, which is a considerable slowdown and it is unlikely that markets will be encouraged enough to push the Euro up.
The expected release of Jackson Hole economic data will be the main driver for markets today and there are hopes that this will lift the Pound from its current lows.
Is it true that Americans will lose value from their US Treasury Bonds if the dollar gets stronger?
If you have owned a US Treasury Bond in the last 10 years, I’m sorry to have to tell you that all you will lose is less than 1%. In many ways, US Treasuries are still the best investment in the world. They earn interest, they are backed by the full faith and credit of the US government, and they are traditionally among the safest investments out there. You may not get rich from owning them, but no one can take your money or threaten to seize it because of a forgotten tax obligation.
Will a strong dollar be good for the UK housing market?
The short answer is yes, but it’s not as simple as that. UK property prices are still a long way off their peak and there is plenty of evidence that a weak pound has contributed to UK real estate’s underperformance relative to other asset classes over the last few years.
But here are some of the factors which need to be considered when trying to answer whether a strong dollar will boost UK property prices:
The demand for housing in London has been dominated in recent years by foreign buyers who have been very sensitive to changes in sentiment about the pound. A lower pound means better value for overseas investors and therefore more buying interest, particularly at the top end of the market where there is less competition from domestic buyers. This should help UK real estate relatively quickly, but it will not necessarily be reflected in house price inflation in the UK.
A strong dollar may also contribute to a reduction in overseas property buyers’ appetite for UK real estate. Overseas property investors tend to favor locations that have good infrastructure, access to international markets, and political stability – all of which are less likely to be found in the UK than in other Western European countries without a strong currency.
