As the UK gears up for a June election and Donald Trump approaches the end of his first 100 days in office, the Pound US Dollar exchange rate has traded at 1.28, its best since early October 2016.
Recent UK data has also been historic, with the annual borrowing deficit hitting the lowest level since the late 2000’s financial crisis.
Looking to the near-future, the Pound could face high volatility on the outcome of June’s general election.
Current polls generally see Theresa May easily winning the election and possibly expanding Conservative seats in the House of Commons.
As well as granting the PM a solid mandate compared to the previous Conservative-only leadership election, this could also be a double-edged sword when it comes to Brexit.
With greater party strength in Parliament, May could be emboldened to press ahead with ‘Hard Brexit’. This could damage the Pound considerably as it implies a sharp and traumatic economic separation of UK and EU.
On the other hand, with a more stable lower House the PM could use a conciliatory tone when beginning talks with EU negotiators. This might lead to a more mutually beneficially and ‘smoother’ exit from the EU, which would go a long way to soothing trader concerns about the Brexit process.
Assuming that Theresa May does remain in power, the immediate aftermath of the election is likely to cause the most Pound to US Dollar movement, depending on the PM’s tone.
The US Dollar could be unsettled more imminently against the Pound, as Donald Trump’s 100 days in office conclude on Saturday.
Having been elected on extravagant promises and pledges that included building a vast border wall and repealing the ‘Obamacare’ healthcare system, Trump has repeatedly come up short.
By his own admission, the 100 days measure is an ‘artificial barrier’, but Trump has nonetheless claimed that;
‘No administration has accomplished more in the first 90 days’.
Given the limited time left in this political honeymoon, it remains to be seen if such a statement actually bears fruit. If the worst happens and the government is shut down by funding disagreements for the border wall, confidence in the Trump Administration may plummet to a new low, dragging the US Dollar down with it.
Recent Interbank GBP USD Exchange Rates
At the time of writing, the Pound to US Dollar (GBP USD) exchange rate was trading at 1.28 and the US Dollar to Pound (USD GBP) exchange rate was trading at 0.78.
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