2017 has already gotten off to a rocky start for the GBP USD exchange rate and, based on recent developments, the first month of the year is set to be a dramatic one for the Pound’s trading against the US Dollar.
Pound US Dollar Exchange Rate Volatile as Key UK Diplomat Resigns, Trump Tweet Alarms US Businesses
The start of 2017 has seen no let-up to the whirl of economic and political news in the UK and the US, meaning that the Pound US Dollar exchange rate has already shifted notably so early on in the year.
Overall, the GBP USD has dropped from an initial rate of 1.23 to 1.22 so far since the start of January.
Notable UK news has contained two positives and a negative; in the former case, both the December manufacturing and construction PMIs have risen above forecasts, raising investor optimism notably.
Less helpful in the GBP USD exchange rate, however, has been the resignation of Sir Ivan Rogers; the UK Ambassador to the EU.
Rogers resigned due to irreconcilable differences with the Government, but his former position as a well-respected and influential figure in the UK and mainland Europe leaves a major vacuum to be filled before Brexit negotiations can begin in earnest.
Over in the US, a pair of Markit and ISM manufacturing PMI rises for December have failed to gloss over President-Elect Trump’s latest Twitter rampage, which has this time focused on carmaker General Motors.
Objecting to GM’s use of Mexican manufacturing to lower production costs, Trump has stated that GM should ‘Make in USA or pay big border tax’. Coincidentally or not, Ford also announced that it would be cancelling plans to open a car factory in Mexico after the tweet, instead opting to invest in an existing site in Michigan.
The event highlights a wider issue found with the future Trump presidency, which is the volatile and unpredictable nature of a President who can trigger business market turmoil in a few brief sentences.
Pound US Dollar Forecast: Looming Supreme Court Decision and Diplomat Reaction due to Shift GBP
Two upcoming events are expected to have a great deal of influence on the Pound US Dollar exchange rate, though neither has a definite timeframe.
First is likely to be the Supreme Court’s verdict on whether the Government can or cannot trigger Article 50 without Parliamentary discussion; should the Government win its appeal, then the Pound is expected to drop due to renewed concerns about a quick ‘Hard Brexit’ taking place.
Elsewhere, a replacement must be found for Sir Rogers; if the chosen candidate is an ardent pro-Brexiteer, as they are expected to be, then the Pound may be damaged in appeal.
Inauguration Day Approaches; Trump Remains a Threat to US Dollar Stability
Looking ahead to later this month, President-Elect Trump will become President-in-full on January 20th, so economists will be keeping a close eye on any first-day remarks by the controversial leader.
If Trump follows through with even a few of his campaign pledges, such as deporting illegal immigrants en masse, then the USD GBP exchange rate is likely to drop heavily.
Recent Interbank Exchange Rates
At the time of writing, the Pound US Dollar (GBP USD) exchange rate was trending in the region of 1.22 and the US Dollar Pound (USD GBP) exchange rate was trending in the region of 0.81.
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