Sterling has continued to make gains against the US Dollar as the rate passes the 1.31 mark for the first time in 10 months.
The majority of the movement has come from US Dollar weakness with so much political controversy constantly bubbling to the surface. Donald Trump’s tenure as US President has arguably been the most volatile start of any presidency. The latest drama has been the revelations that his son took a meeting with a Russian lawyer with the hope of obtaining information on Hilary Clinton. This has raised further concerns about the possibility of Russian involvement in the US election.
Most politicians would have gone to a meeting like the one Don jr attended in order to get info on an opponent. That's politics!
— Donald J. Trump (@realDonaldTrump) July 17, 2017
Over the last few months the way to deal with allegations has become infamous with Trump’s policies. Firstly his team will deny it, then they’ll claim it’s not serious. Once it becomes clear that it’s serious they’ll claim it’s not illegal, then once it becomes apparent it’s illegal they will claim it’s a malicious attack on them that Obama wouldn’t have faced.
Over the last few weeks it’s become clear that the Trump Jr meeting raises major concerns, which in turn has now caused markets to drop.
Whilst this latest event will probably end up being brushed under the carpet, it appears the US administration has reached a new low. Trump’s Obamacare alternative is now stuck and won’t get through the senate as they don’t have enough support from within their own party. This will mean the bill will need to be changed in order for there to be an improvement.
Republicans should just REPEAL failing ObamaCare now & work on a new Healthcare Plan that will start from a clean slate. Dems will join in!
— Donald J. Trump (@realDonaldTrump) July 18, 2017
My argument at this stage would be that Trump is starting to lose the support of his own political party, which may eventually result in a vote of no confidence. It may not take long for the momentum to really start to swing against Trump, and before the end of this year 1.35 may return on the GBP/USD rate.
I think there is unlikely to be any movement from the Federal Reserve on an interest rate hike with so much uncertainty as they’re risk averse already. The moment that becomes reality I would expect the US Dollar to potentially lose 2-3% against the Pound.