Yesterday afternoon the International Monetary Fund (IMF) cut growth forecasts for the US, dropping their predictions from 2.3% to 2.1% for 2017. Whilst this hasn’t had an adverse effect on the currency market it does pose the question of the strength of the US economy. To cut the rate by nearly 10% is quite a significant movement and for an economy expected to be on the charge it could be bad news. The US Federal Reserve has increased interest rates on two occasions this year and there was optimism for a third, however with a growth forecast cut it may cause a re-think.
One of the main reasons for the concern with regards to the US economy is the potential incoming Trump policies. There was always going to be major changes once the Republican was selected to be President but since the inauguration in January there hasn’t been a lot to change. The removal of Obama care and the introduction of the new health bill has been met with fire in the Senate. Trump has had to delay the vote as it currently appears the bill would be voted down. The new bill will be focused on the age of people as opposed to their income which will have a consequence for lower income families.
Whilst the Health Bill is unlikely to directly affect the currency market, it is time spent arguing as opposed to focusing on other pressing issues. The constant challenges on Trumps agenda don’t look like they’re having too much of an effect on the President however it is taking him longer than expected to implement changes.
The end of the week
Tomorrow Q1 Gross Domestic Product for the US will be released and considering the IMF reduced their growth expectation I would be surprised if this data will be positive. The most likely outcome is no change from the previous quarter however I would not be surprised to see a small drop. As mentioned previously in the article, bad news for the US economy could slow down rate hike expectations. A negative reading could certainly have the potential to see the GBP/USD rate back above 1.30 for the first time in a short while.