HomeContributorsFundamental AnalysisPound Rises on Trump Healthcare Setback

Pound Rises on Trump Healthcare Setback

GBP/USD has posted gains in the Monday, as the pair has hit 7-week highs. In the North American session, GBP/USD is trading at 1.2570. On the release front, it’s a quiet start to the week. There are no UK events on the schedule. In the US, we’ll hear from two FOMC members – Charles Evans and Robert Kaplan. There are no US indicators until Tuesday, with the release of CB Consumer Confidence.

Donald Trump’s stunning ascendancy to the presidency last November triggered an impressive rally by the US dollar. However, market euphoria over Trump’s election win is long past. The inquiry into the Trump administration’s links with Russia continues to make headlines, and is another cause for concern for nervous investors. Trump has been in office for over two months, but he has yet to provide any details over even an outline of economic policy. Last week, Trump’s proposed bill to change Obamacare was not even voted on, as the White House could not garner enough support to pass the bill. This latest setback for the beleaguered Trump administration has boosted GBP/USD in the Monday session.

In the UK, last week’s consumer indicators pointed to stronger spending and inflation. Retail Sales sparkled in February with a gain of 1.4%, its highest gain since October 2016. At the same time, for the three months to February, retail sales suffered their biggest slide since 2010. This points to an erosion in consumer spending due to the weak pound, which has fallen 16 percent since the Brexit vote last June. The weak currency and higher oil prices have also sent inflation higher. CPI climbed 2.3% in February, beating the forecast of 2.1%. This is a significant reading, as it surpassed the BoE’s inflation target of 2.0% for the first time in three years. Higher inflation levels have increased speculation that the Bank of England, which has had a neutral stance on rate policy, could raise rates this year. BoE deputy governor Ben Broadbent acknowledged that a rate hike was a possibility in 2017, and the BoE will be under further pressure to make a move if inflation continues to head upwards.

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