Pound-Dollar Exchange Rate: Sterling Falls to Lowest Level so Far in 2018 as China-US Trade War Fears Ease

The pound fell to its lowest level against the dollar since the start of 2018 as the US currency surged and the prospect of the Bank of England raising interest rates this year dwindled.

Sterling dropped 0.5 per cent to a five-month low on Monday of $1.3412 after news that China and the US would put talk of a trade war ”on hold”.

The US had threatened to impose hundreds of billions of dollars worth of tariffs on Chinese imports, prompting rapid retaliation from Beijing, which last month announced its own tariffs on key US products including soya beans, aeroplanes and cars.

But on Sunday, Treasury Secretary Steven Mnuchin said the two sides would delay imposing tariffs as they hammered out an agreement on how to narrow their trade gap.

The dollar rose 0.4 per cent against the euro and 0.6 per cent against the yen on Monday morning after Mr Mnuchin’s comments.

In the UK, inflation and gross domestic product figures are to be published this week, which will give investors further guidance on how soon the BoE might look to raise interest rates.

Higher than expected inflation or GDP numbers would increase the likelihood of a rate rise when the Bank’s Monetary Policy Committee meets in August.

Markets have become much less confident that the BoE will tighten monetary policy this year after a series of disappointing economic releases.

GDP grew at just 0.1 per cent in the first quarter 20108, its weakest performance in more than five years. GDP per head fell in the quarter and was only 0.6 per cent higher than it was a year before.

Deadlocked Brexit negotiations have also been weighing on the pound, with Conservative MPs reportedly preparing themselves for a possible snap general election in Autumn if progress on trade talks continues to stall.

“After intermittently fretting over signs that hostile relations were heating back up between the US and China last week, Treasury Secretary Steven Mnuchin’s claim on Sunday that a trade war was ‘on hold’ has sent a cautious wave of relief through the market,” said Connor Campbell, a financial analyst at Spreadex.

“With Mnuchin stating that the countries had reached ‘a consensus on taking effective measures’ to slash America’s trade deficit with China – admittedly by an unspecified amount – the dollar was the biggest winner on Monday.”

 

Courtesy : independent.co.uk
Photo :Hargakurs.com

 

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