The pound to US dollar interbank exchange strengthened this week, increasing to near a two-week high. This is partly because the UK’s Mr. Johnson and Ireland’s Mr. Varadkar see a “pathway” to a Brexit agreement.
However, it’s worth noting that, while both the UK and Eurozone economies risk contracting this year, America’s economy remains relatively robust. For example, even though the Federal Reserve (Fed) has cut interest rates twice this year, to 1.75%-2.0%, US borrowing costs remain higher than elsewhere.
Meanwhile, in US political events this week, the Democrats’ Presidential candidate forerunner for 2020, Joe Biden, called for US President Donald Trump to be impeached this week, for the first time.
The United States’ economic expansion is already the longest in America’s history, having lasted 11 years. This week, Fed Chairman Jerome Powell, said that the USA’s expansion remains “sustainable.”
Speaking at the National Association for Business Economic (NABE) in Denver, Mr. Powell conceded that, while US economic momentum has eased, there’s little reason to think this is the start of a prolonged downturn. Instead, Mr. Powell argued that the US economy “may be gathering itself”.
Elsewhere, it’s worth noting that the USA’s economy remains in better shape than its counterparts elsewhere, such as the UK or Eurozone. In part, this is because, while Great Britain and the euro area are vulnerable to Brexit uncertainty, as well as America’s and China’s trade war, the USA is more resilient.
Paradoxically, this is even though the United States is one of the main participants in the trade war. This is because America derives the lion’s share of its GDP domestically, rather than from global trade.
Given that the United States comprises a vast domestic market of 330 million people, the largest economy in the world, America is in a strong position to impose tariffs on other countries, while withstanding their effects.
Aside from the USA’s relatively robust economy, the Democrats’ attempt to impeach President Trump continues. This week, President Trump’s potential rival for re-election in 2020, former Vice President Joe Biden, publicly called for President Trump to be impeached for the first time.
This may further encourage Democrats in the House of Representatives to try and strip President Trump of his executive powers, and may influence the US dollar.
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