Tuesday, 24 January 2017

GBP/USD exchange rate update...Trump, Brexit and Supreme Court

Last night saw the dollar continue to weaken, which helped push the GBP/USD cross to a fresh seven week high of $1.2543. However, the gains have been short-lived as the Supreme Court ruling has caused the pound to lose ground, pushing the cross back towards $1.2450.

GBP/USD graph

Why is the dollar weakening?

The dollar is starting to feel the effect of President Trump's administration. For the second consecutive day the U.S. dollar has fallen during the Asian trading session as markets become more and more concerned about Trumps protectionist views.

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Since Trump won the election in November the dollar's value has soared, after he promised to increase fiscal spending and cut taxes in order to boost the U.S. economy.

However, so far he has failed to provide any major insight into those plans, and is currently focusing on renegotiating existing trade deals. He has already withdrawn from the Trans-Pacific Partnership (TPP) which is a twelve nation trade deal, and investors are now concerned Trumps protectionism could do more harm than good for the U.S. economy.

Supreme Court ruling

In the last half an hour the Supreme Court have announced that they will uphold the decision made by the High Court in November.

The Supreme Court confirmed parliament must vote before Article 50 can be triggered and the news has seen the pound give up some of the gains it has made since yesterday afternoon.

Many within the market were expecting the pound to rise if the government lost its appeal, and is one of the reasons why the pound has been rising over the past few days. However, parliament have already said they will not block Theresa May plans, which means today's announcement has very little impact, and has actually caused the pound to give up some of the ground it has recently made.

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