Sterling Gains Against Dollar After Trump Speech
- Posted by Shyam Gokani in Uncategorised
- January 12, 2017
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Sterling rose this morning from its lowest levels for almost 32 years — excluding a “flash crash” in October — with the dollar weakened by a lack of detail on President-elect Donald Trump’s spending plans in his first news conference since his election.
The greenback had rallied since Trump’s victory in the Nov. 8 election, soaring to 14-year highs on the view that his fiscal stimulus programme would boost growth and inflation, leading to a faster pace of U.S. interest rate rises – the so-called “Trumpflation trade”.
Trump provided no clarity on economic policy, the dollar fell to four-week lows, giving a lift to sterling, which was trading more than 2 cents higher than Wednesday’s low
Sterling had plunged to as low as $1.2038 on Wednesday on worries that Britain will face a “hard” exit from the European Union, with immigration controls given priority over single market access.
That was its lowest level since May 1985, barring a brief crash to $1.1491 on Oct. 7 during a period of low liquidity.
Though sterling was trading up half a percent on the day at $1.2270 on Thursday, analysts said Brexit worries would act as a persistent drag on the currency.
The latest bout of nerves this week was driven by Prime Minister Theresa May, who sparked fears that Britain will lose single market access by saying over the weekend that Britain would not keep bits of EU membership.
Traders are now focused on a decision – expected in the coming days – from Britain’s Supreme Court on whether to approve a High Court ruling last year that said May’s government needed parliamentary approval before triggering “Article 50”, which will formally kick off Brexit negotiations.
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