Pound v US dollar: GBP inches ahead as DUP and Sinn Fein close in on a deal

THE pound US dollar exchange rate inched ahead on Monday morning as Theresa May travelled to Belfast in a last-minute push to restore power-sharing government.

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The pound US dollar exchange rate inched ahead this morning

Downing Street has stated that the Prime Minister will meet political parties in Stormont whilst crisis talks between Sinn Fein and the Democratic Unionist Party (DUP) continue.

These meetings will likely be an attempt to encourage negotiating parties to resolve their differences, with several previous rounds of talks having failed to break the deadlock.

This visit will also underline the progress of negotiations regarding the Northern Irish border after Brexit, with Downing Street asserting that the situation has advanced in recent days.

This is pertinent in that Northern Ireland’s border remains a key issue in the Brexit negotiation process.

Mrs May has found herself under significant pressure to secure a deal in the coming weeks so that phase two of Brexit talks can be completed on schedule.

An Irish government spokesman said: “The government has consistently said that the restoration of the institutions is essential in the context of full implementation of the Good Friday agreement and that it will continue to work very closely with the British government to support the northern parties to achieve this outcome.”

The possibility that Downing Street could be nearing an agreement on this front gave Sterling a small boost – with any indication of progress in Brexit talks liable to continue to keep the pound supported.

In other news Bank of England (BoE) policymaker Gertjan Vlieghe has asserted that British wage growth is finally beginning to accelerate.

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The exchange rate was boosted as Theresa May travelled to Belfast

Every federal dollar should be leveraged by partnering with state and local governments

Donald Trump

Mr Vlieghe claimed that there was “increased evidence that tight labour markets are finally starting to have some upward effect on wages”, an attitude indicating that the BoE may have to raise interest rates sooner than previously anticipated.

Across the pond things are slightly quieter, with no pertinent domestic data releases leaving the US dollar vulnerable to political soundbites.

US President Donald Trump is set to unveil his long-awaited infrastructure plan on Monday – a $1.5tn proposal that is set to fulfil a number of his campaign goals.

This plan is centred on the use of $200 billion federal money to improve the national infrastructure.

President Trump touched on this in his State of the Union address.

He said: “Every federal dollar should be leveraged by partnering with state and local governments and where appropriate tapping into private sector investment to permanently fix the infrastructure deficit.”

The Bank of England explains the exchange rate

Markets are apprehensive, however, unsure that the White House will be able to effectively navigate the massive infrastructure plan through such a polarized Congress (particularly after grappling with two federal government shutdowns in 2018).

Nonetheless, early reactions to the proposal have been fairly positive.

Jay Timmons, President of the National Association of Manufacturers thanking President Trump for “providing the leadership we have desperately needed to reclaim our rightful place as global leader on true 21st-century infrastructure”.

The next cause of GBP/USD exchange rate volatility is likely to be tomorrow’s UK inflation report. 

A steeper than expected dip in consumer price pressures could weaken the pound.

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