The dollar remains at the top of its range, as GBP/USD interbank rates dropped below 1.27 as the dollar continues to benefit from increased volatility on the markets, due to the USD’s safe haven status. The latest developments with the US China trade war have spooked investors, who have protected themselves from market volatility by investing in the trusted greenback, strengthening its value in the past weeks.
|Currency Pair||% Change (Month)||Difference on £200,000|
It has been widely covered that President Trump recently escalated the US China trade war last week by upping tariffs on $200bn worth of Chinese imports into the US from 10% to 25%. Earlier this week it was announced that Chinese tech firm Huawei would be added to the entities list, and yesterday added to the speculation the US was targeting the corporate champions of China by cutting off the flow of vital American technology.
This is only going to evoke a reaction from China that would escalate the trade war further. Global brands Nike and Adidas yesterday urged Donal Trump to end the trade war, warning of a catastrophic knock on effect to consumers in the long run. As things stand, with the current Political unrest in the UK combined with the trade war, the USD could become more expensive to buy in the short to medium term.
Despite uncertainty and plenty of reading between the lines in the latest Federal Reserve Bank (Fed) minutes released last night, the dollar remained firm even though speculation over a rate cut in interest rates seems ‘likely’ at some point this year.
The Fed are currently ‘sitting on their hands’ it seems and waiting to see whether inflation continues to dip as to their next move, which would be an interest rate cut. Fed Chair Jerome Powell called the recent dip to 1.6% from 2% as transitionary, it will be interesting to see if this is correct and we see inflation pick up in the coming months.
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