US Dollar Strengthens After Further Stimulus Promised by the Federal Reserve

US Dollar Strengthens After Further Stimulus Promised by the Federal Reserve

The US dollar has continued to strengthen across the board since the Coronavirus outbreak. The US dollar has typically been associated with a flight to safety and that is what appears to be happening at the moment.

The Pound vs US dollar exchange rate has dropped by 16 cents in the last three weeks alone and in the meantime the US Dollar has strengthened by 30 cents vs the Australian dollar as COVID-19 continues to reduce risk appetite in the commodity based currencies.

The recent news has sent the US dollar to a 10 year high vs the Australian dollar creating some very good opportunities for those looking to sell US dollars to buy Australian dollars.

Is The Australian Dollar Showing Signs of Recovery vs The US Dollar?

However, over the last few days the US dollar appears to have lost some of its recent gains and the Australian dollar has begun to fight back.

The US economy is clearly going through a testing time itself with global uncertainty causing a huge sell off in global stock indices. The effects could be far reaching in terms of unemployment, Gross Domestic Product (GDP) and the future trade balance.

US unemployment has hit its highest level in three years and in the meantime retail output in the China, which is the second largest economy in the world, has fallen by over 20% year on year and this could have further negative effects on the US economy which relies on the Chinese market for its own growth.

According to Goldman Sachs they have suggested that US GDP could be hit by as much as 7.5% in the second quarter of 2020. This would be the biggest fall in almost 70 years which would be much lower than the 2.3% fall recorded following the credit crunch 12 years ago.

Further volatility expected on USDAUD exchange rates

As we have seen over the last few trading days there is clearly a huge amount of volatility in the currency markets and I expect this to continue.

One useful way of converting money in such a volatile period can be to use a Limit Order which allows you to pre-agree an exchange rate. With the time difference between here and Australia this particular tool can be very useful in times like these.

Get in touch directly using the form below if you’d like to discuss the factors covers in today’s blog. I’ll be happy to respond personally.