Pound to Dollar Falls Lower as Trade War Tensions Escalate

Pound to Dollar Falls Lower as Trade War Tensions Escalate

The pound to dollar exchange rate is continuing to lose ground with rates for GBP vs USD sitting below 1.2750 as the ongoing Brexit uncertainty drives sterling lower. UK Prime Minster Theresa May is taking her agreed deal with the EU to the country this week to win the general public’s support ahead of a key vote in Parliament expected on the 11th December. The deal on the table has received a hostile reception from a large number of politicians and it seems unlikely at this stage that she will be able to push this vote through the House of Commons.

What impact will a vote against the Brexit deal have on the pound to dollar exchange rate

If Theresa May is unable to find support for the deal then it will increase the prospect of a no deal Brexit, something that is regarded as negative for pound to dollar exchange rates. The EU have stated repeatedly that this deal on the table is the best offer Britain will receive which suggests there is little wiggle room so late in the day for a change of course in negotiations. Rates for the GBP to USD pair are thus likely to remain under considerable pressure ahead of the meaningful vote in Parliament.

If Theresa May is able to find cross party support and win the vote then there would likely be sterling strength against the dollar. However if it is voted down then there is likely to be considerable volatility and a drop in the pound to dollar rate.

US Dollar strength

The dollar appears to be finding further support as US President Donald Trump has threatened to impose further tariffs on Chinese goods to the tune of $267 billion. Fears of an escalation in trade are starting to grow after Donald Trump stated it was “highly unlikely” that he would stop new tariffs which are about to come into force in January.

There had been hope that an agreement on trade could be hammered out at the G20 summit this Thursday although the US President’s comments that he was seeking to raise tariffs from the existing 10% to 25% have reduced the chanced of that happening. This is resulting in a further flight to the safety of the dollar as concerns mount that there could be a global slowdown. Expect a volatile end to the week with the G20 summit which could present some opportunities for those clients looking to buy or sell dollars.

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