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The Dollar has made some significant gains against the Pound in the last two weeks dropping from a high of nearly 1.60 to pushing towards 1.52. The Dollar has fallen today against a day of gains yesterday off the bank of investment in the safe haven currencies (USD, CHF, JPY etc).

But what is the Dollar likely to do in the future? The difficulty with US Data is that as the largest global economy it can react in very differently to any other currency. When the US shows strength it can encourage risk as it indicates that not just the USA but the global enconomy is strengthening. When risk is encouraged people can move away from the Dollar and into riskier currencies such as the Pound and the Euro. So we can see the Dollar lose ground with encouraging US Data.

With the ‘unconvential’ economic measures taken by the American Government such as their ‘QE lite’ program, critics remains split as to the likelihood of a Double Dip Recession in the US and a subsequent double dip in the UK. This means that the market at current is volatile as the attitude to risk on the currency market changes quickly and increases volatility in the market.

As a knock on effect I believe that Non-Farm Payroll data which is due to be released on Friday is likely to be a key data set for the USD / GBP rate. It is released at 13.30 on Friday and it is often a very volatile data set, if this data set is released significantly better or worse than expected – a major possibility then expect the rate to react accordingly.

Keep in contact with your Currency Broker if you are looking at making a US Dollar trade this week.