The pound to US dollar interbank exchange rate increased in value this week, partly because the EU extended the UK’s Brexit deadline by three months, prompting MPs to call a general election.
In addition, the so-called greenback has declined, because America’s central bank, the Federal Reserve, cut interest rates for the third consecutive time.
Meanwhile, it’s been reported that the anticipated US/China trade war truce may not be signed in November, as previously hoped, while Democrats’ impeachment attempt against President Donald Trump continues to progress.
The Federal Reserve (Fed) cut interest rates down to 1.5%-1.75% this Wednesday, the third reduction in a row. The cut was widely predicted, because Fed Chairman Jerome Powell had signalled that the US central bank would continue its “mid-cycle adjustment”, to support America’s economy.
Moreover, in the press conference following the decision, Mr. Powell suggested that US borrowing costs would now stay put for the time being.
Nonetheless, the US dollar weakened after the Fed’s announcement, because lower US interest rates make buying American assets less attractive to the world’s investors.
Another reason why sterling strengthened versus the greenback this week is because it’s been reported that the US/China trade truce could be delayed.
Until this week, it was hoped that President Trump and China’s Premier Xi Jinping would sign their “first phase” trade pact next month, in Santiago, Chile.
However, an anonymous US official has told Reuters that: “If the [USA/China trade pact] is not signed in Chile, that doesn’t mean that it falls apart. It just means that it’s not ready. Our goal is to sign it in Chile. But sometimes texts aren’t ready.” If there’s a delay, this may affect the US dollar.
Lastly, the Democratic Party continues to gather evidence to impeach President Trump, for pressuring Ukraine’s President Volodymyr Zelensky to implicate President Trump’s rival, Joe Biden, in a corruption scandal.
This week, Ukraine expert Lt. Col. Alexander Vindman, who listened to the incriminating July 25th phone call between Presidents Trump and Zelensky, revealed that the White House’s previously-released transcript of the call was incomplete. This too could influence the value of the buck, in future.
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