GBP/USD Exchange Rate Rangebound as US-China Trade Tensions Escalate
The Pound to US Dollar (GBP/USD) exchange rate held steady this morning as markets await US President Donald Trump’s announcement on ‘new’ policies against China. The pairing is currently trading around $1.23.
The US Dollar (USD) remained steady this morning as markets remain cautious amidst escalating tensions between the US and China.
This follows China’s imposition of new national legislation on Hong Kong. This has resulted in a number of important questions around the ‘phase one’ trade deal between the two superpowers.
Michael Hewson, the Chief Market Analyst at CMC Markets UK, commented:
‘Having spent most of this week ignoring the prospect of an escalation of US, China tension over Hong Kong, despite various smoke signals throughout the week suggesting a confrontation was brewing, US markets turned tail sharply late last night on reports that President Trump was going to be holding a press conference later today on China.’
As a result, we could see the ‘Greenback’ begin to rise if tensions between Beijing and Washington erupt, as this would dampen risk-sentiment and see investors seek out safe-haven currencies.
In US economic news, today will see the release of the US Michigan and Chicago Consumer Sentiment Index figures for May.
However, if these continue to fall, we could see the USD/GBP exchange rate edge higher as markets react to uncertainty over the world’s largest economy.
Pound (GBP) Steady as Markets Await Chancellor’s Statement on Furlough Scheme
The Pound (GBP) held steady today as investors awaiting Chancellor Rishi Sunak’s statement on the furlough scheme. Sunak is expected to announce that employers will have to pay a fifth of wages of furloughed staff from August.
Environment Secretary George Eustice commented:
‘Now I don’t know what Rishi Sunak, the Chancellor, will say later in terms of self-employed and the furlough scheme for them, but I think there is a general overarching message here that we’ve had a very generous furlough scheme in place to help people through these extraordinary times and to ensure that businesses’ overheads could be covered.’
Meanwhile, the row over PM Boris Johnson’s aide, Dominic Cummings, has continued for its seventh day in a row.
Sterling traders are remaining wary as the UK Government is under pressure as more MPs calls for Mr Cummings’ resignation.
With no UK economic data being released until next week, the GBP/USD exchange rate has continued to tread water today.
GBP/USD Forecast: Could the ‘Greenback’ Rise on Escalating US-China Trade Tensions?
Pound (GBP) investors will be looking ahead to Monday’s publication of the final UK Markit Manufacturing PMI for May. If this falls below consensus, then we could see Sterling begin to suffer.
Monday will also see the release of May’s US ISM Manufacturing PMI. However, if America’s economy continues to struggle, we could see the ‘Greenback’ benefit from its safe-haven status.
Meanwhile, US-China trade developments look set to remain in focus next week. Any indications of tensions escalating between the two superpowers would boost safe-haven demand for the US Dollar.
The GBP/USD exchange rate will remain influenced by the UK’s coronavirus developments. However, Sterling could begin to rise if Covid-19 infection numbers continue to drop.