The GBP USD exchange rate slid from its weekly high yesterday as the US Dollar was boosted by remarks from Donald Trump over his plans for tax reforms.
GBP USD Slides as Trump Promises to Outline Plans for Tax Reforms
The US Dollar was strengthened yesterday by comments from Trump that he would be announcing ‘something phenomenal in terms of tax in the the next two or three weeks’.
While the comments were vague they were enough to cause markets to begin speculating on the possibility that his reforms might help to bolster the US economy by loosening regulations and providing tax relief to companies to encourage further domestic investment.
The news was also welcomed by investors as it indicates that the new administration might finally start to outline its economic policies after nearly a month in office.
Pound Weakened By Departure of BoE Hawk
The decline in the Pound was also thanks to the announcement from Bank of England Policy Maker Kristin Forbes that she would be stepping down from her post in June.
Forbes has been a persistent hawk within the BoE and made calls as recently as Tuesday that the bank should raise interest rates later this year due to the UK economy’s unexpectedly strong performance since the Brexit vote.
Investors are concerned about the validity of her remarks following the announcement of the departure, while also worrying that the Monetary Policy Committee (MPC) will lose one of its key supports for rate hikes, possibly leading to a more dovish outlook from the BoE after she leaves.
GBP USD Exchange Rate Forecast: US Consumer Confidence Ahead
The GBP USD exchange rate may recoup some of its gains later this afternoon following the release of the Michigan Consumer Confidence report. Markets predict that it will fall from 98.5 to 97.9 as the uncertainty of Trump’s new administration will likely have negative impact on consumer sentiment in February.
Looking to next week, Sterling may rise on Tuesday if the UK’s latest CPI shows a rise in the inflation rate in January, with a possible surge in inflation likely to increase the odds that the BoE will raise interest rates later this year.
Current Interbank Exchange Rates
At the time of writing the GBP USD exchange rate was trending around 1.24 and the USD GBP exchange rate was trending around 0.80.
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