The British pound hit a 7-week high in today’s trading against its US counterpart over uncertainties about Donald Trumps policies after his attempt to cancel Obamacare failed in congress.
At 8.35pm (GMT) the pound was trading at $1.2565 up from $1.2513 in yesterday’s trading.
In his first major upset since taking office, US president Trump was left reeling, after his proposed cancelation of Obama’s health care bill failed to materialize, which now has some predicting that the proposed tax cuts, as well as some other polices may also have trouble finding support.
One of the major factors driving the US dollar higher in recent months was the cut in corporate taxes to be introduced, which is seen as a boom for the greenback, as many companies would relocate offices to the US creating jobs which would also boost consumer spending.
“The health care 'debacle' of last week should add to the pressure as the market’s patience with the US administration’s ability to push its economic agenda is wearing thin,” noted economists at UniCredit.
Heading into Wednesday, the British currency faces a big test as British Prime Minister Theresa May formally triggers article 50, the process for the UK to leave the European Union.
According to analysts at Bank of America Merrill Lynch, the market has not fully priced in the consequences of article 50 or Brexit, and they expect the pound to come under pressure following the announcement. “We reject the notion that sterling has fully priced Article 50 and beyond. Risks to the currency remain to the downside on a disruptive start to negotiations,” noted analyst Kamal Sharma.