This report will examine the factors that could affect exchange rates this week in order to help you stay informed if you need to make a currency transfer. The table below shows the difference you would have received in US Dollars when buying £200,000 at the high compared to the low in the previous month.
|Currency Pair||% Change||Difference on £200,000|
Trump’s tax plans are the main concern for the US Dollar as these are a key barometer of his ability to influence economic policy. A final vote is due today and the US Dollar is gently weaker on concerns that even if the plans go through they will fail to boost the economy in as much the way some had previously believed.
Democrats have criticised the plans as a tax giveaway to the rich and business, in total the savings could be as high as $1.5tn. A key part of legislation to help real estate holdings will directly benefit the President’s son in law and right hand man, Jared Kushner. A move that clearly leaves Trump open to criticism…
The legislation is not all bad, it is reported that it will reduce taxes for all income tax payers in 2018 by around 2%. But with the measures due to expire in 2027 it is estimated low and middle earners will see little difference in their tax, higher earners may have saved about 1%.
The measures ultimately benefit businesses with big increases expected in the earnings of US companies next year, this is due to the reduction in the main rate of corporation tax from 35% to 21%. It appears the reforms will add around 0.5% to economic growth in 2018 for the US, which is good news but not perhaps matching the rhetoric and expectations placed on the US Dollar.
Much of the good news has really been priced in on the US Dollar, even the higher interest rate from last week and the expectation of 3 further hikes in the New Year did little to help the greenback, it actually weakened on the news.
This week is a series of economic data which could move the market, notably the US GDP (Gross Domestic Product) data due out on Thursday at 13.30. The figures are expected to come out in line with the recent trends at 3.3% annual growth which is positive for the US economy. As explained, one of the biggest problems for the US Dollar has been living up to the very high expectations placed on it, if the data disappoints in any way then the US Dollar may weaken.
GBPUSD remains at very favourable levels for US Dollar buyers with Pounds, much improved from some of the lower levels below 1.30 clients had been used to. What could be more likely to present opportunity for US Dollar buyers would be the UK GDP data on Friday which if supportive of the general improvements seen in the UK economy could lift Sterling.
All in all the outcome from the Trump tax plans is key to the next directions on GBPUSD, if you have a transfer to consider buying the US Dollar make sure you are up to date with the latest trends and themes which will impact your exchange rate.
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