The US Dollar has risen by 0.3% against the Pound recently, following an optimistic forecast from Federal Reserve official John Williams.
Future USD movement could be tied to market perceptions of President Donald Trump, who is now back in the White House after concluding his first foreign tour.
Over the first 100 days of Trump’s presidency, the US Dollar saw a number of advances against the Pound, some of which were attributed to a ‘Trump bump’.
This was the name for perceived market optimism about Trump’s economic policies, which included plans to spend big on national infrastructure in order to boost productivity and the overall economy.
Trump’s 2017-18 budget is still under heavy scrutiny in congress, however, with major hurdles including a plan to spend billions building a border wall with Mexico.
If it looks like confidence in Trump’s grand plans is fading, then the US Dollar could gradually slump against the Pound. Signs that his most ambitious schemes will have to be watered down to be approved may be enough to trigger such a depreciation.
Recent GBP USD weakness comes after a high-profile BBC election debate, which featured party leaders and representatives from across the political spectrum.
While Labour leader Jeremy Corbyn made a last-minute commitment and appeared in the debate, Prime Minister Theresa May was notably lacking. Other attendees used this as a rallying point against May’s stand-in, Amber Rudd, with Lib Dem leader Tim Farron declaring that;
‘[Amber Rudd] is not the Prime Minister. The Prime Minister is not here tonight. She can’t be bothered’.
May’s defence was that she was focusing on promoting Conservative plans for Brexit and trying to ‘get the best possible deal for Britain’.
The Pound’s dip against the US Dollar today follows another election poll, which has again shown a narrowing of the gap between the Conservatives and Labour.
The main election scuffles are now over, but there could still be high GBP turbulence before the June 8th election. If May’s non-appearance is considered highly damaging to the Conservative campaign, then polls could tighten further, raising further fears of a narrow Tory win or a hung parliament.
Given May’s insistence that her party is the best choice for a good Brexit deal, traders link the greatest stability with a decisive Conservative election victory.
They may have large margins of error, but if polls point to a close contest on June 8th then the Pound may slump dramatically against the US Dollar.
Recent Interbank USD GBP Exchange Rates
At the time of writing, the US Dollar to Pound (USD GBP) exchange rate was trading at 0.7779 and the Pound to US Dollar (GBP USD) exchange rate was trading at 1.2855.
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