The Pound US Dollar exchange rate has dipped slightly today, but Sterling could advance if House of Lords debates drag on for longer than expected.
The Lords are currently discussing the Article 50 bill, which needs to be approved before the Government can trigger the Article and take the UK out of the EU.
The bill passed quickly through the House of Commons without amendment, but could take a lot longer to be eventually approved by the Lords.
As there is no time limit imposed on the Lords, the debates may drag on into early March, potentially beyond the 9th.
This is when a European Council summit is due, which was originally the date predicted for the triggering of Article 50.
Now, with both Brexit Secretary David Davis and Irish Prime Minister Enda Kenny forecasting no trigger on this date, the Pound may rally if it looks like the UK’s stay in the EU will be prolonged, even if only by a few weeks.
A major source of future US Dollar movement is likely to be the construction of the US-Mexico border wall, which was a foundation point of Trump’s successful election campaign in 2016.
Based on a Department of Homeland Security estimate, the wall-and-fence border could take over three years to complete and cost up to $21.6bn, nearly twice what Trump estimated as the cost when campaigning.
With no signs at present that Mexico will ever actually pay for the wall, the US may end up in a deep hole over the cost, which is likely to reflect poorly on the Trump presidency and lower US Dollar demand.
Further issues could come during the construction process itself; Scowcroft Institute of International Affairs Director Andrew Natsios has estimated;
‘Some of the wall will have to be built on private property and the owners may challenge the federal government’s taking of the land’.
With potential costs and problems mounting before building the wall has even begun, the project may end up a thorn in the side of the US economy and have a persistent negative effect on USD for the foreseeable future.
Recent Interbank GBP USD Exchange Rates
At the time of writing, the Pound US Dollar (GBP USD) exchange rate was trending in the region of 1.25 and the US Dollar Pound (USD GBP) exchange rate was trending in the region of 0.79.
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