How will Trade Wars shape GBP/USD exchange rates?

GBP to USD Rate Flat as UK Data Disappoints and US-China Talks Stall

GBP/USD exchange rates have fallen close to the lowest in 2018, hovering around the 1.275 level, very close to the 1.2692 level we hit earlier in the year. The expectation is that GBP/USD exchange rates could have further to fall, in part owing to a belief that the Trade Wars will not harm the US as much as expected.

It has always been felt that the US will come out the better of any trade spats with other countries. Whilst it might find some difficulties economically as a result of lower trade with global players, there is an expectation that its overall strength will see it the overall winner in the long run.

Xi Jinping and Donald Trump to meet at G20

All eyes are on the meeting between Xi Jinping and Donald Trump, who are set to meet at the upcoming Argentinian G20 summit on Friday. There is mounting speculation that the talks will ultimately prove fruitless, which might see the US dollar lose some value. However, the fact the US dollar has strengthened against most currencies since April when it was at its weakest, signals to me a growing lack of concern over the possible negative implications for the US currency.

GBP/USD exchange rates might take more clues from Brexit developments too. Theresa May’s plans to push her Brexit deal through Parliament are leading to huge uncertainty for GBP. This is another reason why GBP/USD exchange rates have slipped, it is leading to the strong likelihood of GBP falling further if the deal is rejected in Parliament.

Clients with a GBP/USD position will find their rate likely to take cues from further developments on both Brexit and the Trade Wars. Trying to predict these events is very difficult, as is trying to gauge the market’s reactions.

Nevertheless, I suspect GBP/USD exchange rates are close to a bottom ahead of the Parliamentary vote. The market has already begun to factor in the prospect of a no-deal Brexit, this is why we have dropped 3 cents in a week.

For more information on what we might expect next for GBP/USD exchange rates please do not hesitate to speak to me directly. You can send me a message using the form below: