The US dollar has come under pressure since the start of the year due to the partial Government shutdown. Past history tells us that political uncertainty in the form of a Government shutdown dents consumer and business confidence. Back in 2013, 800,000 federal workers were out of work for 17 days and consequently GDP fell by 0.3%.
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With 380,000 out of work at present, economists are suggesting 0.1% will have been shaved off of GDP and that figure is set to rise now that we are into day 26th day; the longest shutdown in the United States history. US dollar sellers should be concerned that the longer the shutdown goes on for the more significant the impact on the dollar could be.
Since the start of the year, GBPUSD mid-market exchange rates have climbed from the 1.24s to the 1.28s, due to the devaluing dollar and political events in the UK. To put this into monetary value a £200,000 transfer into US dollars today could gain clients an additional $6,000 compared to the start of the year.
This week MPs voted against Theresa May’s Brexit deal and commentators are suggesting the UK may not leave the European Union after all. Last night the Prime Minister unsurprisingly survived the vote of no confidence and all eyes will now turn to her speech which is set for Monday. This is when the PM will give forward guidance in regards to the plan for Brexit.
With all options now on the table, anything could happen in the weeks to come. It’s likely that Article 50 will be extended and Theresa May will go back to Brussels to try for further concessions. If this is the case I expect the pound to remain buoyant for the time being against the US dollar. However if it looks like another referendum or General election becomes the likely outcome, this could have a major influence on GBPUSD exchange rates. Outlining your requirements to your account manager enables us to keep you up to date with regular market information as it's released.
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