The US dollar rose against the pound during yesterday’s trading session, following from signals that the Labour Party and some Conservative party members could back a vote of no confidence in the UK Government, if the next Prime Minister pushes the UK towards a no deal Brexit.

Currency Pair% Change (Month)Difference on £200,000
GBPUSD2.1%$5,340

This could potentially lead to a general election, something which could have severe implications on the value of the pound against other currencies. The US dollar fell against the euro over the course of the afternoon to the lowest level in 3 months, following the downward trend since last week when the Federal Reserve (Fed) signalled that its next move could be to cut interest rates in order to boost the economy.

The weakening of the US dollar can be partly attributed to investor concerns surrounding the expected meeting between US President Donald Trump and Chinese President Xi Jinping at the G20 Summit in Japan which begins on Friday. Hopes are that the meeting will enable the leaders of the world’s 2 largest economies to de-escalate the trade war which has been ongoing for the last year, damaging the global economy and sapping business confidence. If talks do not go well, the chances of a complete global recession increase dramatically.

US Vice President Mike Pence was due to speak on Friday, however this has now been cancelled which has been viewed as a positive signal, as the speech Pence gave back in October caused fireworks and severely upset China. The disagreement now goes even further than just tariffs, after the blacklisting of Chinese telecoms giant Huawei which has banned all US companies from doing business with it. Several other Chinese companies have also been added to the entity list. The value of the US dollar has therefore fallen as the chances of the 2 leaders actually coming to an agreement are slim, considering the amount of meetings which have taken place so far with no real progress being made.

Will FED Chair Powell hint towards cutting interest rates?

Will FED Chair Powell hint towards cutting interest rates?

This afternoon will see the release of Consumer Confidence, New Home Sales, and Housing Price Index all released at 14:00, followed by a speech this evening at 19:00 by Fed Chairman Jerome Powell. If Powell provides any further clues that an interest rate cut is likely in the near future, we could see the US dollar weaken further. Clients with US an interest in buying or selling US dollars may wish to plan for any upcoming currency transfers ahead of these announcements.

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