Yesterday afternoon the GBP/USD exchange rates rose back above the 1.32 level and has remained there, having been close to dropping below 1.30 for the first time in 5 months. At the start of the week Sterling was struggling following the uncertainty surround Theresa May’s Government and a potential vote of no confidence. However, as time has gone on the concern appears to have fallen away with the focus once again back on the Brexit talks.
US Tax changes move closer
The proposed tax reform plan that Donald Trump has been trying to push through the Senate has been passed by House Republicans. Major Bank Morgan Stanley this week saw CEO James Gorman suggest the changes would stimulate the economy. President Trump is hoping to have the cut in place as soon as next year to try and stimulate the inflation level by giving consumers more spending potential.
The tax changes are unlikely to have much of an impact on the currency markets in the short term, however if Trump doesn’t get his way we could see a Government shutdown once again. This can have a major effect as the Government essentially comes to a stand-still. Over the next few months the negotiations will take place in the Senate and I would not be surprised to see a conflict when the crunch vote comes around.
GBP/USD exchange rate forecast
Over the next few weeks I would expect Sterling to make back some of the lost ground and see the rate move back towards 1.35. The US are likely to raise interest rates in December but that is now thought to be fully priced into the Dollar. Brexit talks will be key for Sterling in the near future especially if discussions move onto trade talks. Overall I personally see Sterling improving which should make some of the recent lost ground back.