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You are here: Home / US Dollar / US economy shows resilience but what about the politics?

US economy shows resilience but what about the politics?

August 7, 2017 by Lewis Edmonds

US economy shows resilience but what about the politics?

Following on from an extremely strong US jobs report on Friday where Non-Farm Payroll data exceeded analysts’ expectations, the US Dollar continued its strong run against the Pound, testing the 1.30 barrier.

This is due to a combination of the Pound weakening and the Dollar strengthening. Friday’s Non-Farm Payroll report would have helped to strengthen the hopes for a US interest rate rise in the coming months, which in-turn would have strengthening the USD which has been the trend since Friday.

The Pound is currently out of fashion especially since last week’s Bank of England decision, during which a vote of 6-2 to keep interest rates at current levels was recorded. This was a change on the previous month’s decision of 5-3. The change was largely due to new voter Andy Haldane not wanting to disrupt things just yet.

Tension in the US

Whilst the US economy remains strong, current politic uncertainty in the US, and the growing fears of conflict with Russia and also North Korea are keeping the Dollar under pressure.

This week will be heavily influenced by the latest developments surrounding the Trump administration, which vowed to make more reforms to the tax system last week. Of even more importance will be the latest developments surrounding North Korea, which at the time of writing has said it intends to retaliate against the US over recent sanctions imposed due to the country’s nuclear missile program.

I think that the situation with North Korea could be an extremely important event moving forward that could heavily impact exchange rates. Conflict can cause significant movement in exchange rates – normally causing weakness. I think that this, combined with the political difficulties the US is facing with its own government, could mean some long-term weakness for the US Dollar.

Filed Under: US Dollar Tagged With: Donald Trump, GBPUSD, North Korea, UK interest rate, USDGBP

The information on this website is provided for information purposes only. It does not constitute advice to any person on any matter. Every reasonable effort is made to ensure that the information is accurate and complete but we assume no responsibility for and offer no warranty with regard to the same.

About Lewis Edmonds

When he is not offering insights into the what is happening on the currency markets Lewis manages key relationships for an authorised payment institution in the UK.

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