Pound v US dollar: GBP gains erased as trade tensions ease
THE POUND is plummeting against the US dollar this morning, retreating from a near seven-week high as fears of a possible US-China trade war begin to ease. The pound US dollar exchange rate is currently at around $1.415.
This is down nearly 0.6 per cent from this morning’s opening levels and having relinquished almost all of Monday’s gains.
The US dollar is on a stronger footing this morning due to optimism that the US and China may be able to reach an agreement regarding trade.
There have been considerable fears recently that an aggressive response from China regarding recent tariffs imposed on $60 billion worth of Chinese exports to the US could have escalated into a global trade war.
However analysts suggest that trade concessions proposed by China may help to prevent a further escalation in tensions between the world’s two largest economies, much to the relief of currency markets.
Michael Hewson, chief market analyst at CMC Markets UK, said: “The rebound in the US [came] as China moved to assuage US concerns about its trade policies by pledging to open up its markets to external companies.
The rebound in the US [came] as China moved to assuage US concerns about its trade policies by pledging to open up its markets to external companies
“These concessions while fairly modest would allow the US administration to claim progress on changing the status quo where trade is concerned and could pave the way for further discussions further down the line.”
However market fears over the possibility of a US-led trade war are unlikely to have been completely eliminated, which may see the US dollar’s gains limited somewhat.
Meanwhile the pound appears to have come under considerable pressure this morning despite there being little catalyst for movement.
This has led economists to suggest that the fall in Sterling has been driven by technical considerations during end-of-month trading.
USD in 'tricky time' amid potential trade war with China
This is supported by the fact the sudden decline came shortly after GBP/USD struck $1.425, suggesting that a large sell order was triggered.
Looking ahead, the pound US dollar exchange rate may rally tomorrow following the release of the Confederation of British Industry’s (CBI) distributive trades survey.
Economists forecast that retailers will report an uptick in activity this month, likely lending some support to the pound if the index rises, as expected.
Meanwhile the US dollar could face some pressure on Wednesday following the release of the final estimate for US GDP in the fourth quarter, which is expected to confirm growth slowed at the end of 2018.