The New Year has brought upcoming UK and US events into sharp focus, with the triggering of Article 50 in March sure to influence Pound US Dollar exchange rates.
Pound US Dollar exchange rate crumbles after BoE’s Haldane Offers Pessimistic Prediction for 2017
At the end of a jam-packed week for the pairing, the Pound US Dollar exchange rate has fallen by around -0.3%.
Earlier PMI stats were positive, but this latest weakness for Sterling has been caused by a recent speech from Bank of England (BoE) official Andy Haldane.
Speaking on January 5th, Haldane stated that consumers could have a tougher time in 2017, owing to rising inflation and increased uncertainty triggered by Brexit proceedings.
Over in the US, recent domestic data has been mixed, leaving the US Dollar up against the Pound but not by a great deal.
Notable US ecostats have included December’s Adp employment change, as well as the ISM non-manufacturing PMI for the same month.
The number of employed rose by 153k persons at the end of 2016 while, instead of falling as expected, December’s PMI remained at 57.2 points.
Pound US Dollar Predictions: Article 50 Trigger to Cause New Year Knock for GBP USD
While the Pound has undeniably been supported by December’s PMIs all rising, Sterling could still see a potentially alarming crash against the US Dollar before the end of March.
The looming event will be the triggering of Article 50, which starts the UK irrevocably on its path to leave the EU, supposedly with a maximum deadline of two years after the trigger.
Regardless of what kind of Brexit the Government has decided on or had chosen for it by the time of the trigger, the event itself is expected to cause at least a short term drop in the GBP USD exchange rate.
This is due to what Article 50 represents – the start of a potentially lengthy and painful journey into the unknown.
US Dollar Economic Outlook: Continued Trump Twitter Callouts Likely to Erode US Business Confidence
Looking to future factors that could affect the USD GBP exchange rate, President-Elect Donald Trump understandably features in many of them.
Asides from Trump’s impending inauguration on January 20th being likely to trigger mass USD uncertainty, the soon-to-be US leader is also likely to unsettle the US business environment if he continues with his unexpected Twitter attacks on ‘anti-US’ companies.
As well as targeting Boeing and Lockheed in 2016, Trump has more recently taken aim at General Motors and Toyota for operating in Mexico as well as the US.
While defenders of Trump might argue that he is justified in singling out businesses that do not operate in line with his protectionist agenda, the fact remains that picking on multinationals out of the blue has the effect of reducing investor confidence in the US as a consequence.
Given that Trump is not even President yet, the fact that he has stated ‘This is just the beginning – much more to follow’ makes a strong and stable US Dollar in 2017 seem increasingly unlikely.
Recent Interbank Exchange Rates
At the time of writing, the Pound US Dollar (GBP USD) exchange rate was trending in the region of 1.23 and the US Dollar Pound (USD GBP) exchange rate was trending in the region of 0.80.