The Pound has made a minor recovery against the US Dollar on manufacturing data, but remains vulnerable to shocks from Brexit talks.
Sterling started this week on a negative note, when allegations of a clash between Theresa May and Jean-Claude Juncker drove down confidence in the Pound.
This supposed argument has highlighted a continuous threat to the Pound’s future value – the possibility of no Brexit deal being reached.
EU sources have recently forecast that differing opinions during negotiations may see the UK crash out of talks with no actual deal agreed.
Theresa May has denied rumours of fractures in the UK-EU relationship, but even rumours can cause significant Pound movement in the current pre-Brexit atmosphere.
Conservative sources have stated that the UK will not enter into a ‘briefing war’ about Brexit talks, but the latest incident suggests that rising Pound volatility is increasingly likely as talks go on.
When it comes to future US Dollar movement, President Donald Trump remains a strong influence.
Having passed his 100 days milestone, the President has had time to take stock of how his biggest campaign promises have fared. The widely-touted ‘repeal and replace’ of the Affordable Health Act has been placed in legislative limbo, while the equally prominent border wall plan remains on the shelf over funding issues.
Trump has, however, made some progress by watering down his previously radical pledges. Instead of declaring a trade war on China, Trump has instead tried to mend his fences with the Chinese leader Xi Jinping.
Trump has also toned down his opposition to NATO membership, declaring that the organisation was ‘no longer obsolete’.
Given these recent compromises, it is possible that the 45th President will adopt a more moderate approach in the future. As well as easing concerns about his erratic nature, this could also lead to policies actually being approved by Congress, instead of being mired in objections and counter-arguments over their extreme proposals.
If Trump does settle into his leadership role in 2017, the US Dollar could appreciate.
Recent Interbank GBP USD Exchange Rates
At the time of writing, the Pound to US Dollar (GBP USD) exchange rate was trading up at 1.29 and the US Dollar to Pound (USD GBP) exchange rate was trading down at 0.77.
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