Published On: Thu, Jan 16th, 2020

Pound US dollar exchange rate steady as doubts over US-China trade deal increase | City & Business | Finance

Julian Evans-Pritchard, Senior China Economist at Capital Economics, said that the deal was “mostly a rehash of existing commitments”, echoing a more general sentiment which has left US markets feeling jittery over further obstacles to a “phase two” agreement between Washington and Beijing. However, US President Donald Trump’s top trade negotiator, Robert Lighthizer, was more balanced, saying “Are we in an ideal spot? No. Is this a massively good first step? Yes.”

In US economic news, today saw the release of the US retail sales figure for December, which beat forecasts and rose for the third month straight from -0.1 percent to 0.5 percent. 

However, geopolitical uncertainties capped the US dollar’s potential for gains. 

Meanwhile, GBP has struggled to make much headway on the US dollar following yesterday’s release of the UK’s inflation figure for December, which fell to a three-year low. 

The report raised pressure on the Bank of England (BoE) to cut interest rates as early as this month, with several policymakers coming out in support of a rate cut due to the UK’s flagging economy.   

Michael Saunders, a policymaker at the BoE, commented on Wednesday: “It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the two per cent inflation target.”

Brexit uncertainty is also holding back some of the pound’s gains, with concerns rising over whether the UK can secure a free trade deal with the European Union (EU) after the 31 January, when the UK is officially due to leave the EU. 

The pound to US dollar exchange rate will remain sensitive to British economic developments this week.

We could see the pound fall against the “greenback” if tomorrow’s UK retail sales figure for December falls below forecasts and shows reduced levels of consumer spending. 

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