USD/GBP Hits 8-Week Low After Trump Withdraws Healthcare Bill

March 27, 2017 - Written by Tim Boyer

STORY LINK USD/GBP Hits 8-Week Low After Trump Withdraws Healthcare Bill

The US Dollar to British Pound exchange rate recovered from its worst levels on Tuesday afternoon, as US markets cooled from their Monday ‘safe haven’ rush while the Pound was weakened by Brexit jitters.

The UK government will formally begin the Brexit process on Wednesday by activating Article 50. Sterling’s movement is likely to be highly volatile throughout the day.

[Previously updated 28/03/2017]

Although confidence in the US Dollar began to recover overnight the USD GBP exchange rate remained on a downtrend, thanks to the persistent strength of the Pound.

With the matter of a second Scottish independence referendum set to flare up, however, demand for Sterling is unlikely to remain bullish for long.

[Previously updated 27/03/2017]

The US Dollar to Pound Sterling exchange rate has tumbled -0.9% to 0.7946 as investors continue to fear markets have been too optimistic regarding economic stimulus from President Donald Trump.

USD Tumbles as Markets Question Trump Rally

Investors are today selling out of the US Dollar after Friday saw Republicans pulling the bill meant to replace the Affordable Care Act (ACA), known as Obamacare.

The bill did not receive enough support in Congress to be passed into law, despite Republicans having the majority in both Houses.

This has caused significant consternation on the currency and share markets, which have been rising strongly since November on the belief Trump will implement huge spending and tax reforms to boost the US economy.

Bu if Trump can’t get his healthcare bill through Congress, even though many Republicans strongly oppose Obamacare, what is to say that he will have more success with legislation for tax and fiscal stimulus?

That is the question currently hanging over the markets and investors, worried they have been too confident, are quickly selling out of the US Dollar and seeking other safe-haven assets.

Pound Surges as Investors Seek Haven in Sterling

Although not traditionally a safe-haven asset, the Pound is today surging on demand for security as panicked investors withdraw from the US Dollar.

With the shock of the referendum vote for Brexit already fading and many believing a ‘Hard Brexit’ is fully priced-in already, GBP is facing smaller downside risks than other currencies.

Compared to a currency like the Euro, which has several elections on the way and weak economies in Greece and Italy to contend with, the Pound is looking more and more appealing.

This has pushed GBP/USD exchange rates up to an eight-week high.

Will Janet Yellen Boost USD Tomorrow by Remaining Upbeat on Interest Rate Outlook?

There is not much in the way of data set for release from the US today, although speeches from Federal Reserve officials Charles Evans and Robert Kaplan could alter the outlook on monetary policy.

Tomorrow’s economic calendar events could push the US Dollar to Pound Sterling exchange rate even lower.

Although the advance goods trade balance deficit is expected to improve to -US$66.6 billion, consumer confidence is predicted to have worsened in March.

Additionally, Fed Reserve Chair Janet Yellen is scheduled to give a speech after the close of trade; the policymaker may comment on the outlook of monetary policy.

Signs of a more dovish outlook on interest rates in the wake of Trump’s recent defeat would therefore further undermine USD exchange rates.

Meanwhile, there is no UK data set for release either today or tomorrow, leaving Sterling at the mercy of market sentiment.

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TAGS: Dollar Pound Forecasts