The Pound US Dollar 2017 exchange rate hit a new 2017 high on Monday morning. Investors started to become increasingly concerned that the new US Trump administration would not focus on fiscal policy as much as hoped and would also cut US trade ties. GBP USD gained around two cents last week and now trends at around 1.24.
Pound (GBP) Outlook Improved after Confident UK Government Stance on Trade
Last week was vital for the long-term outlook for Pound as the UK government set out to clarify its goals for the nation following Brexit.
UK Prime Minister Theresa May made a Brexit speech early in the week that stated, while the UK would not be able to keep EU single market access, it would still aim to get the best possible UK-EU trade deal after the Brexit.
May spoke again at the World Economic Forum (WEF) later in the week about the importance of globalism. She stated it could be made to work for the average citizen in a way that would not encourage populism.
Overall, the UK government’s confident stance last week was enough to bolster Sterling’s long-term outlook and traders hope Britain will be competitive on trade after the Brexit is over.
US Dollar (USD) Outlook Filled with Uncertainty as Donald Trump takes Office
Investors had previously approached the new US Donald Trump administration with hope that Trump would stimulate the US economy, bringing about growth which would pressure the Federal Reserve into hiking US interest rates throughout the year.
However, during Trump’s first weekend as US President there wasn’t a word on fiscal stimulus, as the administration was instead embroiled in a row over the number of people attending the inauguration.
His inauguration speech also put emphasis on hiring American workers for American jobs. This was perceived as significantly protectionist, which also caused traders to worry about the US trade outlook.
Concerns that US would move away from globalisation under Trump worsened, leaving the US Dollar weaker as well as the USD outlook.
Pound US Dollar 2017 Long-Term Forecast: Could Sterling be in for a Long-Term Recovery?
Donald Trump is now the President of the USA and uncertainty over the short to long-term future of the US economy is high.
This may actually become a blessing in disguise for the Pound. While the Brexit process is expected to begin in March, if Britain continues to see solid economic performance and the UK government continues to show post-Brexit trade confidence, the Brexit-worn Pound could improve.
The US Dollar could weaken considerably if the Trump administration doesn’t bolster US economic activity as previously hoped. This would mean the Federal Reserve may not accelerate its current pace of monetary policy normalisation.
On the other hand, if US fiscal policy is changed after all and the US economy gets a boost in 2017, GBP USD’s long-term outlook will remain on the downside.
GBP USD Interbank Rate
At the time of writing, the Pound US Dollar 2017 exchange rate trended in the region of 1.24, while the US Dollar Pound exchange rate traded at around 0.80.
Comments are closed.