May 29, 2019 - Written by John Cameron
STORY LINK Pound Sterling US Dollar (GBP/USD) Exchange Rate Rangebound as US-China Trade War Escalates
GBP/USD Exchange Rate Steadies as China Threatens US by Holding Back Mineral Trade
The Pound US Dollar (GBP/USD) exchange rate steadied today and is currently trading around $1.265 on the interbank market.
The US Dollar (USD) stabilised against the Pound (GBP) as the US-China trade war escalates following China’s threat to use rare earth minerals as a bargaining chip as the conflict continues between the two superpowers.
Hu Xijn, the Editor of the Chinese Global Times, tweeted:
‘Based on what I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future.’
Meanwhile, China’s telecom giant, Huawei, has called upon Washington to ‘halt illegal action’ against the company, further heightening tensions between the US and China.
Song Liuping, the Chief Legal Officer at Huawei, hit out saying:
‘The US government has provided no evidence to show that Huawei is a security threat. There is no gun, no smoke. Only speculation.’
GBP/USD Exchange Rate Flat as May Blames Brexit Failure on European Vote Disaster
The Pound, meanwhile, has been generally subdued following comments from Prime Minister Theresa May that the poor performance for both major parties – Labour and the Conservatives – during the European elections was down to their failure to deliver Brexit.
Due to the lack of UK economic data today, many Sterling traders have been focusing on ongoing political developments instead.
The UK’s uncertainty surrounding the leadership of the Conservative Party ahead of May’s leaving date on 7 June is proving a drag on the Pound, as fears are mounting that hard-Brexiters like the former Foreign Secretary Boris Johnson, is fast becoming a favourite.
Ian Lavery, the Chair of the Labour Party, has also spoken out against a second referendum, saying:
‘It does feel that a certain portion of “left-wing intellectuals” are sneering at ordinary people and piling on those trying to convey the feelings of hundreds of thousands of Labour voters. Perhaps, in reflecting on the results, we should consider the effect all of this has had.’
GBP/USD Outlook: Brexit and Leadership Challenge to Remain in Focus
US Dollar traders will be looking ahead to tomorrow’s release of the flash US GDP figures for the first quarter, which are expected to ease at 3.1%.
These will be followed by the US initial jobless claims figures for May, which are expected to increase, potentially weighing on confidence in the ‘Greenback’.
The US flash personal consumption prices for the first quarter will also be in many USD trader’s sighs, however these are expected to remain static.
Sterling traders will be awaiting the speech by David Ramsden, the Deputy Governor for Markets for the Bank of England, and with any dovish comments about the UK economy this could see the GBP/USD exchange rate begin to sink.
The GBP/USD exchange rate will most likely be driven by political developments, however, with the leadership contest as well as Brexit remaining in focus, as the UK faces increasing uncertainty surrounding its future relations with the EU.
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TAGS: Pound Dollar Forecasts