The Pound has managed a rate rise against the US Dollar at the start of the week, though could well be in for a bumpy ride if USD manages to return to form.
For the US Dollar, a recent crash in demand has followed the latest furore surrounding President-Elect Donald Trump, who may have been employing a distracting social media strategy.
Gradual GBP USD Appreciation Triggered after PM’s Pro-Business Speech
The Pound started trading on Monday poorly, but has since staged a recovery, mainly on account of Theresa May’s comments.
Speaking at a Confederation of British Industry (CBI) conference, May pledged to slash UK corporation tax (CT) and spend billions on research, although the PM also drew criticism for apparently dropping plans for greater worker-boardroom representation.
In the US, the US Dollar has started off trading this week on a soft note, having declined almost universally after the weekend’s focus on a social media storm in a teacup.
The inciting incident was criticism of Vice President-Elect Mike Pence when he attended a theatre, which prompted Trump to use Twitter to denounce those who had objected to Pence’s presence.
Whether coincidental or deliberate, Trump’s latest Twitter attacks drew a lot of attention away from his recent cash settlement of a lawsuit over Trump University, a failed institution alleged by attendees to be a con or scam.
A Taxing Situation? Future GBP Value may Hinge on UK’s Corporate Tax War
Looking ahead to the future Pound US Dollar exchange rate, Sterling may well be unsettled by the possibility of a corporation tax war developing between the two nations.
The primary issue is that as Donald Trump has pledged to cut CT down to 15% once he is in office, Theresa May has also pledged of UK CT levels that;
‘My aim is not simply for the UK to have the lowest corporate tax rate in the G20, but also one that is profoundly pro-innovation’.
This would obviously see UK CT fall below 15% if May is sincere about her pledge, which would represent a gamble on the part of the Government.
Should this new and competitive level of CT fail to draw in fresh investment and businesses, the Government may well have simply lowered tax revenues on existing companies in the UK, which is unlikely to reflect well on the UK economy or the Pound.
US Dollar Future Forecast: Further USD Confidence Losses Likely if Trump Diversions Continue
The actions of President-Elect Donald Trump, particularly when it comes to his media profile, are expected to come under close scrutiny in the future, which could well see economists lose further confidence before Trump finally takes office.
Using a social media outcry as a diversionary tactic may have worked recently, but could lose its shine if Trump persists in starting a ‘Twitterstorm’ every time he wants to commit to divisive action.
With confidence in the President’s professionalism strongly linked to perceptions of the US as a whole, any signs of amateurish behaviour from Trump in the future are likely to weaken hopes of a strong US economy under his governance.
Recent Interbank Exchange Rates
At the time of writing, the Pound US Dollar (GBP USD) exchange rate was trending in the region of 1.24 and the US Dollar Pound (USD GBP) exchange rate was trending in the region of 0.80.
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