Labour launches “radical” election manifesto
The launch of the Labour Party’s election manifesto left the pound treading water yesterday. Jeremy Corbyn set out plans to transform Britain with public sector pay rises, higher taxes on companies and a sweeping nationalisation of infrastructure, in what he described as a “radical” manifesto. The GBP/USD interbank exchange rate subsequently edged 0.1% lower.
However, the pound would have taken some comfort from his claim that he would not grant permission for another Scottish referendum “in the early years” of a Labour government. A second vote on independence north of the border would give rise to further political uncertainty that could hamper the pound.
US-China Trade Tensions Intensify
Ongoing trade tensions between the US and China have shown little sign of abating this week. Sources close to the White House suggested that a trade deal between the two superpowers was unlikely to be secured before the end of the year, while protests in Hong Kong have added to concerns that ‘phase one’ of the highly anticipated deal could be delayed until 2020. Tensions between the two sides intensified after the US House of Representatives passed two bills backing the protestors, despite warnings from China not to interfere. All that’s left is for President Trump to sign the bills into law.
On Wednesday, the US Federal Reserve’s (Fed) meeting minutes revealed that policymakers decided that October’s rate cut would signal a pause to its easing cycle, and it was in no rush to reassess its strategy. The safe-haven dollar is likely to benefit from any US-China trade jitters – which previously caused the dollar to slump – now that the Fed has pushed the pause button.
Yesterday’s data from the US didn’t have any nasty surprises for the domestic economy: US initial jobless claims held steady at 227k; while the Philly Fed manufacturing index improved in November.
The GBP/USD interbank exchange rate could edge slightly higher today following the release of flash Purchasing Manager’s Index (PMI) data. If November’s UK services PMI exceeds expectations, showing growth in the sector after a month of stagnation, the pound is likely to receive support.
If President Trump signs the Hong Kong human rights bills into law, trade tensions are likely to rise, which could provide the dollar with an upswing of support.
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