GBP/USD Exchange Rate Slides amidst Brexit, Trade Uncertainty
UPDATE: The Pound US Dollar (GBP/USD) exchange rate has fallen back from a seven-week high this morning as the pairing was stuck by a bout of profit taking as well increased caution ahead of an EU summit later in the week, in which Brexit is likely to dominate.
Meanwhile in broader trade the US Dollar finds itself on the defensive this morning following the announcement of Trump’s latest round of tariffs against China.
While previous measures against China have proved USD positive as investors flocked to safe-haven currencies, with the latest round of tariffs also targeting consumer goods, markets have begun to worry about the potential impact on the US economy.
GBP/USD Exchange Rate Rallies above $1.31 as US Trade Outlook Sours
UPDATE: The Pound US Dollar (GBP/USD) exchange rate is punching higher today, with the pairing accelerating by 0.5% and breaking back above $1.31 as an uncertain trade outlook weighs on the ‘Greenback’.
This comes as US President Donald Trump is said to be ready to implement his next round of tariffs on China, a move which is likely to see a marked escalation in tensions between Washington and Beijing.
Morning Brief: US-China trade tensions heat up https://t.co/ELYeZ9Aa6R pic.twitter.com/K4n5NyVPd5
— Yahoo Finance (@YahooFinance) September 17, 2018
While the recent run of trade uncertainty should theoretically be supportive of the US Dollar, some analysts suggest this trend may begin to reverse following some lacklustre US inflation figures last week as well as reports of Beijing taking a more aggressive stance if the trade dispute continues.
GBP/USD Exchange Rate Rallies on Disappointing US Inflation Figures
The Pound US Dollar (GBP/USD) exchange rate ticked higher during last week’s session, as some early losses in the ‘Greenback’ were accentuated by some weaker-than-expected US CPI figures.
This data showed that US inflation came in at 2.7% in August, down from a decade high of 2.9%, and prompting some concerns that, should inflation have already peaked, the Federal Reserve may be forced to slow the pace of its monetary tightening in 2019.
Meanwhile the Pound was pushed higher last week thanks to some positive Brexit sentiment, with the EU’s chief negotiator Michel Barnier’s suggestions that it is ‘realistic’ to believe that a Brexit deal could be finalised by November being welcomed by GBP investors.
However, slightly taking the wind out of Sterling’s sails was the latest Bank of England (BoE) rate decision, with the bank’s neutral bias on monetary policy robbing the UK currency of momentum in the latter half of the week.
This led to the US Dollar recouping some of its losses at the very tail end of the session, when it was lifted by some strong US consumer sentiment figures.
Today, GBP/USD is currently trading at an interbank rate of €1.3101, which is up 0.25% on the day.
Air of Caution as Pound US Dollar (USD) Exchange Rate Opens Week Higher
While the Pound US Dollar (GBP/USD) exchange rate is edging higher this morning, a sense of caution in light of US trade uncertainty and a Brexit warning from the IMF leaves the pairing facing considerable uncertainty.
In regards to US trade, markets are increasingly nervous this morning about the prospect of Donald Trump pushing forward with plans to impose tariffs on $200bn worth of Chinese exports.
This follows a report in the Wall Street Journal suggesting Trump is poised to enact the tariffs at the start of this week’s session, a move which would greatly escalated the trade dispute between the US and China.
At the same time GBP investors are also a little skittish as the IMF’s latest health check on the UK economy has seen the fund warn that growth has moderated since the EU referendum in 2016.
IMF publishes the preliminary conclusions of our annual review of the UK economy, the Article IV consultation. https://t.co/9IsXtGhdG8
— IMF (@IMFNews) September 17, 2018
The IMF also looked at the all possible Brexit outcomes, warning that a best-case scenario in which the UK is able to secure a broad deal with the UK will still lead to growth being below the long-term average in 2018 and 2019.
GBP/USD Exchange Rate Forecast: Dip in UK Inflation to Weaken Sterling
Looking ahead, the most impactful release on this week’s data calendar looks set to be the UK’s latest Consumer Price Index (CPI)
With economists forecasting that August’s CPI figures will reveal UK inflation fell back again, we could see the Pound US Dollar (GBP/USD) exchange rate trend lower should it prompt concerns that it may further weaken the case for the BoE to raise interest rates anytime soon.
Further influencing Sterling sentiment this week will be the latest round of Brexit negotiations, with any positive progress towards a deal likely to be met with cheer by GBP investors.
Meanwhile a fairly quiet week of US data could limit the US Dollar’s ability to advance this week, with the currency’s fortunes likely instead to be tied to the ongoing trade dispute between the US and China.