Global Markets were rattled yesterday following the news the US escalated the trade war with China. Trump has begun the process of adding 10% tariffs on a further $200bn of Chinese imports. This is on top of $50bn last week. The US Dollar report below goes into further detail about how this could impact USD rates as well as the global economy. The table shows the range of exchange rates for GBPUSD during trading on Wednesday, and the difference in return when selling £200,000.00 during the high and low points of the trading day.
|Currency Pair||% Change||Difference on £200,000|
Robert Lighthizer, a US trade representative stated the following.
“For more than a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition.
We have been very clear and detailed regarding the specific changes China should undertake. Unfortunately, China has not changed its behaviour — behaviour that puts the future of the US economy at risk.”
The list of goods on the tariff is extensive ranging vacuum cleaners to the rather obscure, badger hair.
China have previously vowed to match the US Dollar for Dollar on tariffs. This cannot continue for long however as China would soon find themselves putting tariffs on all US exports.
This war could prove incredibly damaging for both economies, not to mention the global economy with the two biggest economies on the planet in a fully-fledged trade battle.
Usually, when a country or region partakes in a trade war you would expect the currency in question to weaken. This is not the case for the US however. In times of economic uncertainty investors will flood to safe haven currencies. The greenback is the currency of choice due to it’s safety and high returns.
If you have a requirement selling the pound to buy the Dollar I am afraid there is little reason to be optimistic short to medium term. One saving grace however is 1.30 seems to be holding up as a resistance point.
US Consumer Price Index (CPI) is a measure of inflation and it can move the markets as if inflation moves closer to the 2% target we could expect a move from the Federal Reserve to hike rates sooner than expected.
Federal Open Market Committee member, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis is due to speak today. It is also possible we could see a hint towards future monetary policy here so it could be worth keeping an eye on if you have a trade involving the US Dollar.
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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