The pound to US dollar interbank exchange rate reached a multi-month high this week, partially because the UK PM Boris Johnson at last reached a Brexit deal with the EU. In addition, the greenback’s weakness is because the US economy has slowed, according to fresh statistics.
Meanwhile, early signs of a thaw in the trade war between the United States and China could prove complicated, as Congress intervenes in Hong Kong’s protests against Beijing’s restricting its civil liberties.
To begin with, according to the US Census Bureau, sales in American shops and online fell by 0.3% this month which was well below forecasts for a 0.3% gain, and well below August’s 0.6% increase. This was the first fall in US retail sales in seven months, since February.
In particular, American consumers cut their spending on automobiles, building materials, and online purchases, with vehicle sales dropping by -0.9%, the most in eight months.
This doesn’t bode well for America’s economic growth over the Autumn, because consumer spending makes up 66% of America’s GDP.
Elsewhere, according to the US Federal Reserve’s (Fed) Beige Book of business contacts this week, US economy growth continues, but is being weighed down by Washington’s trade war with Beijing.
The latest Beige Book says that “Business contacts mostly expect the economic expansion to continue; however, many lowered their outlooks for growth in the coming six to 12 months.” For example, a contact told the Boston Fed that they’ll delay building a chip manufacturing plant, until there’s greater trade clarity.
Meanwhile, it’s worth adding that US President Donald Trump announced a preliminary “first phase” trade deal with China late last week, covering agriculture, currency and intellectual property protection.
It’s hoped that this will mark the end of the trade war between the world’s two largest economies, with tariffs already amounting to hundreds of billions of dollars. In particular, President Trump has praised the “good will” between the two sides.
However, the trade truce could be complicated, because the US Congress has denounced Beijing’s “sinister intentions” towards Hong Kong and supposed attempts to curtail the autonomous region’s democratic rights.
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