GBP USD Exchange Rate Ticks Up on US Uncertainty over Taxes

April 24, 2017 - Written by Ben Hughes

STORY LINK GBP USD Exchange Rate Ticks Up on US Uncertainty over Taxes

The Pound’s small advance against the US Dollar today follows a Confederation of British Industry (CBI) report on manufacturing and business optimism.

The CBI’s data shows manufacturing orders to be growing at their fastest pace in six years, while orders from outside the European Union were the highest ever.

The cloud to the silver lining has been a specific slowdown in April’s exports, which has led some to speculate that production may slow in the coming months.

Although the Pound has recently climbed against a weakened US Dollar, GBP losses may still make up most of the week’s currency movement.

Tuesday’s public sector net borrowing data is expected to show an expansion of the current trade deficit, from -1.08bn to -1.5bn. This could lower confidence in the government ahead of June’s election, which would raise the spectre of an economically risky alternate government taking shape.

Another source of Sterling weakness may be Friday’s Q1 GDP growth rate figures, which are predicted to show a quarterly slowdown and minor annual rise.

The US Dollar has dipped slightly against the Pound today, falling to a rate of 0.77. This follows a sharp turnaround in Donald Trump’s attitude towards the North American Free Trade Agreement (NAFTA).

Covering US trade deals with Mexico and Canada, NAFTA has been labelled a ‘disaster’ by Trump, who has also promised to change how the US trades with Canada.

This goes against his previous aims of merely ‘tweaking’ the arrangement, which has unnerved traders at a time of increasingly unpredictable activity from the White House.

High-impact US data releases aren’t due until Thursday and Friday this week, but the USD GBP exchange rate could still be shifted dramatically on Wednesday.

Over the weekend, President Donald Trump declared that he would announce ‘big tax reform and tax reduction’ plans on Wednesday.

Amid speculation, top Trump officials have given mixed messages about the potential tax changes.

Treasury Secretary Steven Mnuchin mentioned a widespread overhaul, consisting of ‘comprehensive economic tax reform’.

Conversely, Office of Management and Budget Director Mick Mulvaney has clouded the picture by stating;

‘I don’t think we’ve decided that part yet. You can either have a small tax cut that’s permanent or a large tax cut that’s short-term’.

If Trump makes unprecedented tax change plans on Wednesday, the US Dollar may drop due to investor uncertainty. On the other side, minor adjustments are more likely to reassure traders in the near-term.

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