Earlier this week the US stepped up its trade war with China, after US President Donald Trump outlined plans for an additional $200bn worth of tariffs on Chinese imports. These are due to take effect from Monday next week. More on the escalating trade war and the potential impact on USD in the market report below, with the table showing the range of cable exchange rates during the past month, highlighting the importance of timing when carrying out a currency exchange.

Currency Pair% ChangeDifference on £200,000
GBPUSD3.21%$2788.90

China has since retaliated and confirmed that they will hit back with $60bn of tariffs on US goods. The trade war appears to be escalating not just in terms of the numbers involved, but also in the rhetoric after Trump warned China against attempting to influence the upcoming US midterm election. Trump threatened that there will ‘great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!’

 

No real progress between the US & China over escalating trade war despite positive noises from both sides

The US Dollar has been dropping in value over the past few weeks against a raft of currencies, and cable (GBP/USD) has hit a 2-month high.

I don’t expect the trade war between the US and China to negatively impact the US Dollar though, as the markets generally believe that the US has less to lose from the tariffs. Trump has threatened to add further tariffs to another $237bn worth of products which would mean that the entirety of China’s exports to the US would receive tariffs.

It’s worth noting that the Chinese stock market has lost over 20% through 2018 so far, so the effects of the trade war are being felt both in China and in other parts of the world perhaps more so than the US so far.

What topics could influence the GBP/USD rate in the near future?

In my opinion, the outcome of Brexit discussions along with whether or not the US Federal Reserve carries out the 2-further interest rate hikes this year are likely to be the most important topics throughout the rest of 2018. The current GBP/USD rate currently sits closer to its annual low than its high, so some positive news for the UK is likely to result in a positive move for the Pound. US Dollar sellers should be aware of this potential outcome.

In the shorter-term, there will be both Continuing and Jobless Claims released this afternoon at 1.30pm.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.