Senate Deal Boosts Dollar—Pound Takes a Hit
GBP/USD weakened and was briefly pressured by sellers near 1.3760 in early European trading on Friday. The US dollar strengthened slightly against the pound after US President Donald Trump and Senate Democrats reached a deal to avoid a government shutdown. The market now awaits today's US PPI data for clues on the direction of inflation and interest rates.
The deal paved the way for the Senate to vote on a government funding package, after Democrats agreed with Trump to scrap a planned full-year spending bill for the Department of Homeland Security (DHS). This news immediately boosted sentiment toward the dollar, as political risks were perceived to have decreased and markets calmed somewhat.
Meanwhile, Trump said he would announce his choice to replace Jerome Powell as Fed Chair on Friday, with speculation pointing to former Fed Governor Kevin Warsh. The market believes a figure like Warsh could help maintain the Fed's independence, so the initial reaction was likely positive for the dollar. Meanwhile, in the UK, the Bank of England is expected to hold interest rates at 3.75% next week, with the next cut expected no sooner than April or June—this also means there's little room for the pound to strengthen in the near term. (az)
Source: Newsmaker.id
