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US Dollar Pound Exchange Rate: USD/GBP Falls as Concerns over US Economy Escalate after Tech Giant CFO Arrest

December 11, 2018 - Written by John Cameron

The US Dollar Pound Sterling (USD/GBP) exchange rate is down today, and is currently trading at £0.7923, after GBP was strengthened by today’s release of October’s average earnings figures which showed a better-than-expected increase.

USD, meanwhile, was hit by last week’s arrest of China’s comms giant Huawei’s Chief Financial Officer, Meng Wanzhou, which stalled market confidence in the ‘Greenback’ as trade tensions between the US and China flared up again.

Meanwhile the UK has faced further Brexit turmoil after Prime Minister Theresa May announced yesterday that the parliamentary vote on her withdrawal agreement would be delayed to allow her to renegotiate aspects of it.

Yesterday also saw a number of disappointing data releases for the UK, most notably the non-EU trade balance, which showed a decrease by £-4.251B against last month’s £-2.946B.

However these figures were buffered slightly by the release of the UK’s GDP figures for October, which showed a marginal increase by 0.1% on last month’s 0.0%.

USD/GBP Exchange Rate Dips as Concerns over Geopolitical Tensions Mount on Huawei Arrest

The US Dollar (USD) is continuing to suffer from concerns over increasing US and China trade tensions, with fears that an escalation in the trade conflict between the two countries could trigger a trade war.

Dan Ives, an analyst at the investment firm Wedbush, voiced his fears on the issue, saying:

‘The Huawei CFO situation . . . it’s the straw that could break the camel’s back.’

USD was further hit by today’s release of the NFIB business optimism index figures for November, which showed a worse-than-expected decrease of 104.8 against last October’s 107.4, boding a lessening in overall market optimism in the US economy.

Later on today will see a slew of US inflation and sentiment data releases, although this is not expected to influence the USD/GBP exchange rate significantly, with geopolitical tensions dominating investor attention.

Pound to US Dollar (GBP/USD) Exchange Rate Rises as US Economy Falters

The Pound (GBP) started strongly today with the release of the average earnings figures for October showing a better-than-expected increase of 3.3% on an annual basis.

These were followed by the release of November’s claimant count change figures, which showed a drop in unemployment levels, providing Sterling investors with some much-needed confidence in the economy amidst the ongoing Brexit turmoil.

The release of the UK’s ILO unemployment rate, furthermore, showed a static 4.1%.

Meanwhile in political news, Theresa May is trying to renegotiate her Brexit withdrawal agreement, seeking ‘further assurances’ over the Northern Ireland backstop.

However GBP investors are remaining cautious after comments from EC President, Jean-Claude Juncker – who will talk with May later on today – saying:

‘The deal that we have achieved is the best deal possible, it is the only deal possible. [But there is] room enough to give further clarifications and further interpretations.’

USD/GBP Outlook: Brexit and US-China Relations Remain in Focus

The USD/GBP exchange rate is likely to be dominated by political forces this week, with the ongoing development of US-China trade tensions causing concern for markets, potentially limiting confidence in the ‘Greenback’ as controversies throw the G20 summits trade ‘truce’ into uncertainty.

Meanwhile Brexit continues to dominate Sterling traders’ attention, with Theresa May rallying to amend her Brexit withdrawal agreement after yesterday’s vote delay.

Tomorrow will see a raft of US data releases, with the most significant being the latest consumer price index for food and energy, which is expected to increase, perhaps providing a leg-up for the US Dollar.

This will be followed by the release of November’s monthly budget statement which is expected to be bearish.

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