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Trump’s Tariff Hike Delay Leaves the Pound Sterling US Dollar (GBP/USD) Exchange Rate Flat

September 12, 2019 - Written by John Cameron

Pound US Dollar (GBP/USD) Exchange Rate Flat as US-China Relations Appear to Cool

The Pound Sterling US Dollar (GBP/USD) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of $1.2333.

A spark in risk-appetite amongst investors left the safe-haven Dollar flat against Sterling on Thursday.

US-China relations appeared to be cooling as China announced a basket of US goods would be exempt from further tariffs.

In response, US President Donald Trump announced he would be delaying a scheduled tariff hike by two weeks.

Commenting on this, senior market analyst for Asia Pacific, OANDA, Jeffrey Halley said:

‘The nascent thaw in US and China trade relations appears to be gathering momentum.

‘Just as the presidential tweet on tariffs this morning has injected more momentum […] we are only one social media post away from a thoroughly unpredictable President turning sentiment on its head.’

However, while the gesture may ease tensions ahead of October’s face-to-face negotiations, investors do not see this as a sign a trade deal is within sight.

In a note, Greater China economist at ING, Iris Pang wrote:

‘The exemption could be seen as a gesture of sincerity towards the US ahead of negotiations in October but is probably more a means of supporting the economy.

‘There are still many uncertainties in the coming trade talks. An exemption list of just 16 items will not change China’s stance.’

Dollar (USD) Under Pressure as Trump Calls for Negative Interest Rates

Rising risk sentiment comes as investors await the European Central Bank’s (ECB) interest rate decision, which markets expect policymakers to ease policy to support weaker growth.

This afternoon’s decision is likely to set the tone for next week’s Federal Reserve meeting, which could see policymakers cut rates for the second time this year.

July saw the Federal Reserve slashed rates for the first time in a decade, with slowing global growth as well as US-China tensions likely to cause the Fed cut again next week.

Meanwhile, on Wednesday, US President Donald Trump called for the Fed to send interest rates below zero, which would effectively reward those able to borrow and charge those who save.

Sterling (GBP) Flat as Yellowhammer Confirms ‘Severe Risks’ of No-Deal

As UK parliament was prorogued on Tuesday, Brexit tensions continue to be the main catalyst for movement of Sterling.

Labour has insisted that it is ‘more important than ever’ that parliament is recalled as the recently released Yellowhammer document confirmed ‘severe risks’ to leaving the EU without a deal.

Labour’s Brexit secretary, Sir Keir Starmer said allowing parliament to reconvene would give lawmakers ‘the opportunity to scrutinise these documents and take all steps necessary to stop no-deal.’

These comments come just after Wednesday’s ruling by Scottish judges that the suspension of parliament was unlawful.

Pound US Dollar Outlook: Will Disappointing US Inflation Weigh on USD?

Looking ahead to this afternoon, the US Dollar (USD) could be left under pressure following the release of August’s inflation data.

If the Consumer Price Index (CPI) does not rise as high as expected, it could further add to a case for a Fed interest rate cut.

Meanwhile on Friday, the Dollar could suffer further losses if August’s retail sales figures disappoint.

If sales do not rise as high as expected, the Pound US Dollar (GBP/USD) exchange rate could edge up.

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