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Pound sterling helped by Donald Trump’s healthcare defeat to seven-week high against US dollar

The defeat has caused some in the market to question the President's ability to implement other policies around regulation and tax

Josie Cox
Business Editor
Monday 27 March 2017 16:57 BST
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With Article 50 due to be triggered on Friday, forecasts are mixed on how sterling might respond over the coming weeks and months
With Article 50 due to be triggered on Friday, forecasts are mixed on how sterling might respond over the coming weeks and months (Thomson Reuters Eikon)

The pound has surged to a seven-week high against the US dollar after Donald Trump's flagship healthcare bill failed to secure enough support from Republicans on Friday, calling some of the President’s other promised policies into question.

Sterling briefly jumped above $1.26 on Monday afternoon and was still trading at $1.258 at market closing time in London - its highest level against the dollar since the beginning of February. The dollar also fell sharply against the euro, the Swiss franc, Japan’s yen and the Canadian dollar, according to Thomson Reuters data.

The American Health Care Act’s failure on Friday marks a significant setback for Mr Trump, who had promised to repeal and replace Obamacare. It has caused some in the market to question his ability to implement other policies, especially around regulation and tax.

Promises of major financial reform have in recent months supported the dollar and propelled major stocks indices to record highs, but details of exactly how Mr Trump plans to implement this sweeping change have been limited.

“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,” economist at UniCredit wrote in a note. They said that they currently favour the euro and the yen over the dollar.

Sterling has been sent on a bumpy ride in recent weeks, buffeted by rhetoric around Brexit.

With Article 50 due to be triggered on Wednesday, forecasts are mixed on how sterling might respond over the coming weeks and months.

Last week Deutsche Bank said that the pound could fall by another 15 per cent by the end of this year.

“We do not see sterling (currently) fully pricing a hard Brexit outcome,” the bank wrote in a note.

Many economists’ forecasts are more optimistic than Deutsche’, but few expect the currency to recover from its post-referendum lows any time soon.

Even after the dollar’s recent slump, the pound is over 15 per cent down on the US currency since the EU referendum in June.

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