GBP/USD Exchange Rate Rises ahead of CBI Stats and Tax Vote

December 18, 2017 - Written by Frank Davies

STORY LINK GBP/USD Exchange Rate Rises ahead of CBI Stats and Tax Vote

The Pound ultimately lost ground to the US Dollar last week, owing to high uncertainty about Brexit.

The GBP/USD exchange rate opened in the region of 1.3394 on Monday, later closing down lower at 1.3324 late on Friday.

The week’s best pairing exchange rate was 1.3453, while the worst was 1.3306.

GBP/USD Rate Rises despite Concerns about Brexit Trade Talk Timing

Today’s small Pound to US Dollar rise comes after a hectic week of Brexit news, where the UK finally gained permission to move ahead on ‘phase two’ of negotiations in 2018.

EU leaders had been sceptical about the UK’s ability to make agreeable suggestions for key Brexit issues, but ultimately approved of last-minute negotiations.

Problematically, the Pound actually crashed against the US Dollar after this confirmation took place, mainly because of the timing of future Brexit discussions.

The UK might not properly start discussing trade deals until March 2018, based on comments from EU officials last week.

This has been highly problematic for Pound traders, who are concerned that this won’t leave enough time for UK negotiators to conclude a satisfactory trade agreement.

It is assumed that while Brexit talks will continue in 2018, the UK will only have until October to actually reach an agreement on key issues like trade and a transitional arrangement.

This is because EU members seemingly need six months to examine and ratify UK-EU Brexit agreements, culminating in the UK finally exiting the multinational union in March 2019.

Potentially throwing these expectations into chaos, EU Chief Brexit Negotiator Michel Barnier has warned that;

‘The British had the idea they could mingle everything: the price for past commitments, the financial issue and the future.

We said: first we settle the past, like in any separation, then we start talking about the future.

So parallel talks will start probably next March. The actual negotiations on the future relationship will only begin once the UK leaves the EU’.

If Barnier’s assertion that the UK can’t discuss post-Brexit trade until after it leaves the EU is backed up, the Pound could drop sharply against the US Dollar.

USD/GBP Rate Worsens ahead of Crucial Tax Reform Vote

The US Dollar has slipped against the Pound and other peers today, in the lull before an extremely important vote on national tax reform.

The Republican Party has been pulling out all the stops to try and secure final approval from the House of Representatives and the Senate, which will put the measures on track for implementation.

The pressure is certainly on for Republicans to see final approval go ahead, given how badly the party looked when it failed to ‘repeal and replace’ the Affordable Care Act earlier in 2017.

Emphasising this sentiment, New York Republican Representative Chris Collins has said;

‘My donors are basically saying, “Get it done or don't ever call me again.”’

Likewise, fellow Republican Mark Meadows has warned of lost seats if the party stumbles at the last hurdle, saying;

‘It's all about getting things done.

If we don't get things done, we don't have to worry about the election in Alabama, we have to worry about our own elections back home’.

Is Pound to US Dollar Rate Volatility ahead on UK Trading Stats?

The Pound might see turbulence against the US Dollar today and tomorrow, when Confederation of British Industry (CBI) data is released.

The CBI will be putting out its industrial orders stats for December today, along with distributive trade figures on Tuesday.

Unfortunately for those looking at the UK economy, industrial orders are tipped to decline, while distributive traders are also set for a slowdown.

Such results could weaken the Pound, outside of any Brexit-based announcements.

Apart from the high-impact US tax reform vote, the US Dollar could otherwise be affected by GDP growth rate stats out on Thursday.

Finalised figures for Q3 are tipped to show growth on the quarter, which might result in the US Dollar gaining ground.

With the tax reform vote, approval in the House and Senate could boost the US Dollar, as there are still hopes that the reforms could trigger an economic surge.

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TAGS: Pound Dollar Forecasts