US stock-index futures edged higher on Thursday in preparation for Trump’s highly anticipated healthcare bill, which the House will vote on to replace Obama’s affordable care act. This will be an opportunity for Trump to show markets he can fulfill campaign promise, although it’s unclear at this stage whether members of the House will vote in favour of the new Healthcare Act.
Yellen provides no hints on monetary policy
Yellen’s conference on community development today provided no further hints towards monetary policy, but instead focused on a survey produced that found children who grew up in poverty were twice as likely to struggle with financial challenges later in life.
As such US Dollar exchange rates remained flat during the conference but GBP/USD have edged higher above 1.25 following strong UK Retail sales this morning.
Will GBP/USD exchange rates continue to strengthen?
In my view, GBP/USD has been undervalued since the UK’s vote to leave the EU, and much of the movements back above 1.25 are simply pricing corrections.
That being said, there are two main points that markets need to consider moving forward:
1. The affects of a Trump Presidency and his ability to fulfill his promise of economic stimulus
2. The FED’s stance towards future monetary policy and whether the next rate hike will emerge in Q2.
On the Pound’s side, I would expect further movements to be dictated by the looming Brexit negotiations that will take form upon declaration of Article 50, which the UK Government have signalled for 29th March.
Economic data this week to shape the US Dollar
A quiet rest of the week for UK data but plenty of opportunities for movements on GBP/USD. Durable Goods Orders and US Manufacturing PMI could set the tone for the FED’s next interest rate decision.
If figures disappoint I would expect a significant fall for US Dollar exchange rates as markets back away from the prospect of a rate hike in May.