GBP/USD Exchange Rate Muted as Markets Brace for G20 Summit
The Pound Sterling to US Dollar (GBP/USD) exchange rate is stuck trading in a narrow range this morning as markets remain cautious ahead of the G20 Summit taking place in Japan this weekend.
At the time of writing the GBP/USD exchange rate is trading at $1.2677 this morning, virtually unchanged from its opening levels.
US Dollar (USD) Rangebound as Trump-XI Meeting In Spotlight
The US Dollar (USD) is in a holding pattern this morning, as USD investors remain particularly reluctant to alter their positions in the currency ahead of a key meeting between US President Donald Trump and this Chinese Counterpart Xi Jinping on the side lines of the G20 Summit in Japan.
Following a breakdown in talks earlier this year, trade tensions between the US and China have markedly deteriorated, with the two powers exchanging fresh tariffs and the US blacklisting Chinese telecoms giant Huawei.
However there is optimism that the Trump-XI meeting could result in the two leaders reaching a truce on trade, potentially weakening the US Dollar as this is likely to prompt a risk-on mood in markets.
On the other hand many observers suggest there is little scope for improvement at the meeting, with analysts expecting the US to reject reported demands to lift the ban on Huawei, an outcome which could fuel demand for the safe-haven US Dollar.
Analysts at Deutsche Bank suggest:
‘Unsurprisingly, the headlines second-guessing what may or may not happen have picked up in recent days with the latest being the WSJ story yesterday suggesting that Xi will insist on any trade truce including the US lifting the Huawei ban.
‘Given the rhetoric that surrounded the Huawei ban when it was announced, plus the fact that law enforcement is theoretically separate from trade policy, the bar for progress on that front feels high.’
Pound (GBP) Stable as GDP Prints in Line With Expectations
Meanwhile the Pound (GBP) is steady this morning following the final release of the UK’s second quarter GDP figures.
According to data published by the Office for National Statistics (ONS) domestic growth was confirmed to have accelerated by 0.5% at the start of 2019.
Commenting on the data Rob Kent-Smith head of GDP at the ONS said:
‘DP grew solidly and was unrevised in the first quarter of 2019, with manufacturing seeing strong growth due to orders being brought forward ahead of the UK’s original EU departure date.’
GBP/USD Exchange Rate Forecast: Will US Inflation figures Dent the US Dollar?
Looking ahead to later this afternoon, the Pound to US Dollar (GBP/USD) exchange rate may trend higher following the release of the US PCE Price Index.
As the Federal Reserve’s preferred indicator of inflation, expectations that the index will show that price growth slowed last month could weigh on the US Dollar as it would likely increase the chances the Fed could target a rate cut next month.
Meanwhile, with the UK having exhausted its data for the session, the focus for GBP investors is likely to turn to next week and the release of the country’s latest Manufacturing PMI.
This could give the Pound a leg up at the start of next week’s session as economists forecast the manufacturing sector will have shown modest growth in June having contracted last month.