GBP/USD Exchange Rate Rangebound Ahead of Trade Talks
The Pound Sterling to US Dollar (GBP/USD) exchange rate is in a holding pattern this morning as markets nervously await the start of US-China trade talks this afternoon.
At the time of writing the GBP/USD exchange rate is rangebound, with the pairing stuck at a one-week low around $1.2992.
US Dollar (USD) Subdued as Latest Stage of Trade Talks Loom
The US Dollar (USD) is trading narrowly against the Pound (GBP) and the majority of its other peers this morning as movement in currency markets is limited ahead of the US-China trade talks taking place in Washington later today.
Investors were shaken this week after US President Donald Trump shocked markets by threatening to hike tariffs from 10% to 25% on $200bn worth of Chinese goods in a major escalation in trade tensions between the two powers.
This was a wake-up call for traders, who had become complacent in recent months amid reports that the US and China were close to finalising a deal.
Trump said the move is in response to Beijing reneging on a number of commitments already made in the draft trade agreement that the two sides have been negotiating for the better part of a year.
Speaking at a rally on Wednesday Trump said:
‘By the way, you see the tariffs we’re doing?
‘Because they broke the deal. They broke the deal. So they’re flying in, the vice premier tomorrow’s flying in – good man – but they broke the deal. They can’t do that, so they’ll be paying.’
All eyes are now on Chinese vice-premier Liu He, as he visits Washington for trade talks this afternoon to see whether a deal can be salvaged and the introduction of more punitive tariffs on Friday can be avoided.
This understandably leaves investors reluctant to alter their positions in the US Dollar and other currencies this morning, as the outcome of today’s talks will have far-reaching consequences, with Beijing already stating it is ready to retaliate in the event that the US does hike tariffs.
– China’s Commerce Ministry: China Is Fully Prepared To Defend Its Interests, Has Determination And Capacity To Do So
– Trade Delegation Has Already Left Beijing For US
– Vice Premier Liu Visit To The US Shows China’s Sincerity
— LiveSquawk (@LiveSquawk) May 9, 2019
GBP/USD Exchange Rate Forecast: Sterling to Rally as UK GDP Surges?
Looking ahead to the end of the week, movement in the Pound US Dollar (GBP/USD) exchange rate looks set to be dominated by the publication of the UK’s latest GDP report.
Sterling may look to pare some of this week’s losses on Friday as economists forecast the GDP figures will reveal UK economic growth accelerated at the start of 2019, leaping from 0.2% to 0.5% in the first quarter.
However the accompanying investment figures could potentially limit the upside to GBP exchange rates tomorrow, with analysts expecting Brexit uncertain will have resulted in business investment in the UK contracting for yet another quarter.
Meanwhile, outside of the US-China trade talks, the US Dollar may also be influenced by Friday’s US CPI print, with USD likely to find some support if domestic inflation ticked higher in April as forecast.