The US Dollar has recently advanced to a rate of 0.7659 against the Pound. Despite this, the USD remains vulnerable to the implementation of tax proposals by the US government.
US Dollar Crash Possible if Trump Tax Reforms Go Ahead
On a week where Donald Trump has promised ‘much…on trade, the military and security’, the US Dollar could be devalued by tax news.
Economists have been critical of Trump’s tax reform plans, which are predicted to dramatically increase inequality within the country.
According to the Commitment to Reducing Inequality (CRI) Index, the US is already performing ‘very badly’ at tackling inequality. Researchers compiling the CRI believe that the US would fall further in the CRI if planned tax reforms go through, which would push the US even lower on global rankings.
Commenting on the forecasts, Oxfam America official Paul O’Brien said;
‘When you already have countries like Portugal and Slovenia ranking higher than the United States on the overall index, we think that’s a concern considering the wealth of the US. The reason we did this comparative index is in [a] large part to challenge policymakers like President Trump to look to other economies and other societies, to give people smarter ways to give everyone an opportunity to lift themselves from poverty’.
The Trump administration has shown that it is not above modifying planned reforms based on mass objection, but if the planned reforms go through without being changed then the US Dollar could drop sharply against the Pound. Greater inequality would put greater strain on national services and could push communities to breaking point in the worst-case scenarios.
Signs of UK-EU Agreement in Brexit Talks could Boost Pound Value
As Brexit negotiations start up for the second round in Brussels, the progress of these talks is being closely watched.
The biggest takeaway from June was that there were clear differences between the EU and UK on the issue of citizens’ rights.
UK Prime Minister Theresa May had offered EU citizens some level of rights after 5 years of residence in the UK, but this was soon deemed inadequate by EU officials.
Looking to get the second round of talks off on a better footing, Brexit Secretary David Davis has declared that he wishes to ‘lift the uncertainty’ about EU citizens.
Making it clear that he plans to get to the ‘substance of the matter [and] get down to business’, Davis’ enthusiasm bodes well for the ongoing talks.
If this initial hurdle can be cleared quickly and negotiators can move onto other issues, the Pound could appreciate as confidence about the Brexit process grows.
Recent Interbank USD GBP Exchange Rates
At the time of writing, the US Dollar to Pound (USD GBP) exchange rate was trading at 0.7654 and the Pound to US Dollar (GBP USD) exchange rate was trading at 1.3064.
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