Pound traders have been cautious on Monday morning, with Sterling only seeing a minimal rise against the US Dollar.
This advance comes ahead of a high-impact announcement – UK industrial strategy plans for the coming years.
Over in the US, politicians remain on edge as efforts to implement tax reforms enter a critical phase.
UK Industrial Strategy Reveal could Trigger GBP/USD Rally
The Pound could break free of its tight trading in the near-term, when the government’s industrial strategy is put on display.
This will consist of government plans to boost UK economic growth before the country leaves the EU, as a form of financial safety net.
Investments are thought to be an integral part of the government’s plans, which will include a number of planned partnerships with private companies.
Summing up the context around the strategy has been BBC Business Editor Simon Jack;
‘The long-awaited industrial strategy lands after a bleak economic assessment of the UK economy delivered by the independent Office for Budget Responsibility on budget day.
[This] showed slowing economic growth and dismal productivity’.
Mr Jack has also provided a rough guide to what the industrial strategy hopes to accomplish;
‘Pick an industry that the UK is already good at and needs investment.
Chuck in a bit of government money, cluster the right institutions around it, commit to provide the skills base and give them somewhere to try their new stuff.
That could mean faster trials for drugs in the NHS or using public roads to test driverless cars.
[Then] private investment ensues’.
If the government’s yet-to-be-revealed industrial strategy is well received by traders, then the Pound could make a clear rise against the US Dollar.
A sceptical reception to the plans could have the opposite effect, however, leading to a noticeable GBP/USD drop.
US Tax Reform in Focus for Future EUR/USD Rate Movement
The US Dollar could turn highly turbulent this week, as the Republican Party makes another push to implement nationwide tax reforms.
President Trump will be meeting with his party’s senators on Tuesday in a bid to unite the party on the planned reforms, which are as controversial as they are sweeping.
A vote could take place as early as Thursday, but the Republicans have a smaller majority in the US Senate compared to the House of Representatives.
Making an optimistic assessment of the situation, Republican Senator Lindsey Graham said;
‘The economy needs a tax cut and the Republican Party needs to deliver so I think we’ll get there’.
Graham has previously been pessimistic about the consequences of failing to implement tax reform, warning;
‘If we don’t, that’s probably the end of the Republican Party as we know it’.
If the Republicans do manage to take another step towards the implementation of the reforms, the US Dollar could be lifted against the Pound.
Another high-profile failure in reforms might instead drag on the USD/GBP rate.
Traders and the US public have yet to see the new administration actually enact real change in the country, so another large-scale letdown might send the US Dollar tumbling.
Recent Interbank GBP USD Exchange Rates
At the time of writing, the Pound to US Dollar (GBP USD) exchange rate was trading at 1.3342 and the US Dollar to Pound (USD GBP) exchange rate was trading at 0.7495.
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