Trump’s obsession with border wall is hurting the Dollar
The current US Government shutdown is set to become the longest in history, the partial shutdown has now been going for 20 days. Trump is adamant that he will receive funding for the Mexican border wall despite his mid-term election losses. The democrats now have control of the House of Representatives and they have sated they will not give the go ahead to Trump’s wall.
Trump walked into a meeting on Wednesday with Democrats and when he was refused funding for the wall he walked out. Yesterday Trump said he has the authority to bypass the House of Representatives by declaring a state of emergency.
There are still 800k Government employees who are not working due to the shutdown and this has been the case since mid December. This does not bode well for the dollar and this could soon hit data releases which will not sit well with investors.
Federal Reserve Chairman Jerome Powell has been very dovish of late in regards to potential rate hikes in 2019. The Trump factor is causing the Fed to be more cautious than last year due to the escalating trade wars with the European Union and China.
GBP/USD hit a 20 month low at the beginning of 2019, but has since gained 2.5% due to the trade wars and the Government shutdown. I would certainly not credit the fall to sterling strength.
The pound is still suffering due to the Brexit situation and I am afraid the majority of outcomes to Tuesday’s vote could be sterling negative. One interesting outcome would be if May is ousted or resigns. Usually in the event a country’s leader is lost, the currency in question would weaken, however in this instance it may not be the case, as a second referendum comes back into play.
If a second referendum were to take place polls suggest the UK would remain in the UK and this would no doubt boost investor confidence an in turn the pound.
All though this is a possible outcome I would not postpone my trade if I was selling the pound to buy the greenback. The risk is simply too high. If you have to move on a currency transfer in the short to medium term it may be wise to take advantage of rates as they sit.
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