Trade Wars and Brexit Uncertainty Continue to Drive GBP/USD Exchange Rates

Trump trade optimism sends the Pound to AUD rate lower

Sterling failed to make advancements against the US Dollar over the weekend, with GBP/USD exchange rates continuing to trade around 1.30.

Whilst this key threshold continues to offer GBP some support, the Pound is clearly struggling to make any impression beyond this level under current market conditions.

US impose further tariffs on Chinese goods

The major talking points over recent days have centred around US President Donald Trump’s decision to impose further heavy tariffs on many Chinese goods.

With many of the previous tariffs more than doubling, the US laid out yet another market, which indicates that a resolution to the on-going trade war is showing no signs of reaching a positive conclusion.

There had been rumours over recent weeks that progress between the world’s largest two economies had been made, but it would seem as though for the time being at least, the US is happy to allow the saga to rumble on.

Whilst Trump has made his position clear, the fallout from these penalties is likely to have an adverse effect on many US consumers who are now going to have to pay the price of increased goods. This in turn could impact the US economy in the longer-term but somewhat ironically, it could also work in the US’ favour as it would seem as though China are working tirelessly towards concluding a deal.

Pound to Dollar forecast

In terms of the impact this on-going trade standoff could have on GBP/USD rates, it is conceivable that any failure to conclude a deal could have a negative impact on the global markets and ultimately investors risk appetite. This in turn could in fact benefit the US Dollar, which historically has always been used as a currency of choice by investors in times of global uncertainty, due its relative ‘safe haven’ status.

Looking at the Pound, it is struggling to sustain any major upturn due to the on-going market uncertainty associated with Brexit. With the current cross party talks yet to yield any breakthrough in the current stand-off, whispers of a potential second referendum continue to gather pace.

With the longer-term outlook clouded in uncertainty, the Pound may continue to find only limited support until there is some tangible evidence that progress towards a viable conclusion has in fact been made.

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