The US Dollar is enjoying a surge in value following news that the US and China were finally making progress again in trade talks, with a deal seeming likely this time round.
The gains for the USD put it at £0.75717 and €0.88235 – the highest performance for three weeks – but it is also giving investors cause to be optimistic that the bonanza US economy from 2018 will return and so will its benefits.
Improved GDP figures released late last week also helped boost the Dollar, with statistics from the Commerce Department showing that gross domestic product rose by 2.6% in Q4 – higher than the 2.3% forecast. The overall US economy grew by 2.9%; up from 2.2% in 2017.
The American stock market’s early forecast is predicting gains for the Dow Jones, while China’s markets already recorded a nine-month high earlier today, with the Shanghai Composite Index up 1.1% for the day. So optimistic are China’s markets that the improvement is akin to the market bubble of 2015, and one insider reported that for every stock that fell on the SCI, seven others made gains.
Jerome Powell, Chairman of the Federal Reserve. Image courtesy of the official Federal Reserve Flickr account.
Comments from President Trump about the US Dollar caused a slight wobble over the weekend after his speech at the Conservative Political Action Conference in Maryland. Speaking to Republican attendees, Trump was critical of Jerome Powell – Chairman of the Federal Reserve – but without naming Mr Powell specifically, instead referring to “a gentleman that likes raising interest rates in the Fed”.
President Trump told guests: “I want a strong dollar but I want a dollar that does great for our country, not a dollar that’s so strong that it makes it prohibitive for us to do business with other nations and take their business”.
This isn’t the first time Trump has hit out at Powell, with many instances recorded on Twitter:
The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch - he can’t putt!— Donald J. Trump (@realDonaldTrump) December 24, 2018
In keep with the traditional negative correlation to the markets, gold’s price has slipped in the past week, having failed to break the psychological barrier of $1,350. The price in Dollars now has one ounce of gold at $1,294.16 (-2.75%), with investor optimism and confidence seeing their interest return to the US stock markets for now.
The Pound Sterling has also enjoyed a strong week, hitting a 22-month high against the US Dollar of over $1,32 and a five-month high against the Euro of €1.16. Despite the Dollar’s latest improvement, the Pound is still holding steady, and this has put pressure on domestic gold prices. Gold is currently at £974 per ounce having been as high as £1,019 per ounce in the past seven days – a 3.96% drop. One of the big reasons for a fall in price has been the Brexit reassurances against a no-deal scenario issued by Prime Minister Theresa May. Investors are cautious though – previous promises from the government have seen surges in stock market interest and the value of the Pound, only to come undone a few weeks later when a parliamentary vote nears.