Sterling has found plenty of support above 1.32 against the USD this week, with the pair currently trading around 1.3270.
In truth, cable rates have remained relatively flat and range bound over the past week, with the USD failing to gain any momentum back towards 1.30.
With the UK government in turmoil and President Trump’s state visit set to begin tomorrow, it’s likely to be an interesting and potentially volatile few days ahead for the markets.
Controversy and Trump are never far apart and his comments regarding the current state of the UK have only served to stoke the fire ahead of his pending visit. He claimed the UK was “in turmoil” and was quick to defend his ‘friend’ Boris Johnson.
Whilst these comments have had little impact on GBP/USD rates as of yet, it will be interesting to see how his upcoming visit unfolds in terms of any trade talks and relationships post Brexit. Any clients with an upcoming GBP/USD should also be keeping a close eye on any media reporting of his meetings with UK Prime Minster Theresa May and former Foreign Secretary Boris Johnson.
Whilst the Pound is currently struggling to break free from its shackles, it looks unlikely fall below 1.30 in the short-term. Of course, any negative developments or further resignations inside the UK government could impact this but for the time being, that threshold looks as though it will provide firm resistance to any spikes for the USD.
Looking at the US economy and it continues to brush off trade fears for the time being, with growth in the US economy predicted to reach 4% in Q2 and 3% by the end of 2018.
Trump’s internalisation of US Manufacturing and Production seems to be supporting a rise in economic output but his introduction of trade tariffs on China and the EU, is causing business confidence figures to fall.
With the US rate of inflation accelerating in the wake of higher oil prices, it is likely that the Fed will commit to further interest rate hikes this year. With further inflation data out today, it will be interesting to note whether this trend has continued.
Those clients looking to sell USD should also be wary that any softening of Trump’s current stance regarding global trade restrictions, could lead to an increase in investor confidence and global growth. This in turn could drive up investors risk appetite, which will likely that funds start to be moved away from the safer haven USD and into riskier currencies thus weakening the Dollar.
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