GBP/USD rates have continued their fall recently and now sits close to a 2 and a half year low. There has been a rise in tensions and the overall economic health for the US as a result recently.
US President Donald Trump announced that the US would place a 10% tariff on an additional $300 billion of Chinese goods last week. Beijing vowed to retaliate and that may have taken place this last 48 hours as the value of the Chinese currency fell against the USD to the lowest level for over 11 years. Chris Krueger from Investment firm Cowen called China’s retaliation “massive,” and “on a scale of 1-10, it’s an 11.” He highlighted that the Chinese government telling their state buyers to stop buying US agricultural purchases which is a real escalation in tensions. To put this change in tensions to scale, the S&P suffered its biggest one-day fall in two years on the back of this news.
The US Fed cut interest rates by 0.25% on concerns about global growth and weak inflation only a few weeks ago, this was the first in over a decade. Goldman Sachs is now forecasting there is a 75% chance that the FED will cut interest rates at their next meeting in September by a further 0.25% as a result of global tensions climbing further.
Economic data continues to be released for the US and is likely to have a daily impact on the cost of buying USD. Generally, data has been strong, it is really the change in growth and the suggestion that the level of economic expansion in waning which has been the worry. For example, the US labour market continued to add workers last month and the overall unemployment rate remained relatively unchanged, close to a 50-year low and wage growth ticked up to 3.2%.
On Wednesday more jobless data is due for release. On Friday Production Price Index is released and expected to remain unchanged with growth of 1.7%
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