Though the dollar had recovered slightly against sterling on Monday morning, it was still trading at just £0.7695.
The pound’s dollar value, climbing to $1.3004 this morning, is at a height it hasn’t seen since September 2016 – before Theresa May’s stance on a hard Brexit battered sterling.
The has euro also gained ground on the dollar, rising 0.22% to $1.1231 in a matter of hours this morning.
Architas’ Lowcock said markets have finally gotten over the initial euphoria of Trump’s election and shifted their focus onto the controversy following his presidency.
“Markets have to some extent woken up to Trump. There is a realisation the ‘Trump bump’ is not going to have the biggest impact on markets and that Trump is looking less and less likely to deliver.
“And there’s an increased risk that he could be impeached or at least swamped by the scandals that have hit his office.”
Although the possible threat of impeachment and the scandals surrounding Trump’s administration have contributed to the dollar’s recent weakness, part of the volatility in currency and equities is a result of the natural drop in volumes (“Sell in May”) over the summer months.
Also, “volatility has got to very low levels so I’m not surprised there’s been a move up from here,” Lowcock added.
Darius McDermott, managing director of Chelsea Financial Services, attributes the dollar depreciation to a pause stemming from softer-than-anticipated US data and, consequently, revised expectations on the Federal Reserve’s aggressiveness.
“A bit of a pause – that’s how I would describe it,” said McDermott.
“I think markets have continued watching Trump, who is now on his first overseas trip, and there’s been a realisation that his pledges are going to be difficult to get through Congress.
“The reversal of the dollar recently reflects the fact that US data hasn’t been super strong this quarter.”
And given the weaker GDP growth, “it’s not like the Fed is going to have to aggressively raise rates,” he said.
