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Mon 30 Nov 2020 19:46GMT

Pound (GBP) Hits Post-Brexit High vs US Dollar (USD) as US Trade Fears Escalate

Published: 25 Jan at 9 AM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, China, Germany,

Pound Sterling (GBP)
After climbing to multi-month highs against the Euro and US Dollar on the back of better-than-expected wage data the Pound struggled to maintain this bullish momentum for long.

Nevertheless, hopes for an imminent Bank of England (BoE) interest rate hike remain heightened, limiting the downside potential of GBP exchange rates.

This expectation leaves Sterling vulnerable, though, if Governor Mark Carney fails to take a more optimistic tone in comments at the World Economic Forum.

Euro (EUR)
Confidence in the single currency remained distinctly muted ahead of today’s European Central Bank (ECB) policy meeting, in spite of more positive domestic data.

Even though the German GfK consumer confidence index for February edged higher this was not enough to offset jitters over the likely tone of the latest ECB commentary.

If President Mario Draghi proves particularly dovish this could see EUR exchange rates extend their slump further.

US Dollar (USD)
Concerns over the increasingly belligerent tone of US officials on the subject of trade have kept the US Dollar under pressure.

Comments from Treasury secretary Stephen Mnuchin stoked fears of a potential trade war with China, adding to the bearishness of USD exchange rates.

Even so, a narrowing of the advance goods trade deficit could offer the US Dollar some degree of support this afternoon.

Australian Dollar (AUD)
The risk-sensitive Australian Dollar has benefitted from the relative weakness of the US Dollar, holding onto an uptrend against many of its rivals on Thursday.

However, in the absence of any fresh domestic data the strength of AUD exchange rates remains decidedly fragile at this juncture.

Any particular shift in market sentiment could see the ‘Aussie’ fall, especially if the US continues to express a protectionist rhetoric.

New Zealand Dollar (NZD)
Investors were disappointed by the fourth quarter New Zealand consumer price index, which fell short of forecast on both the quarter and the year.

As inflationary pressure eased from 0.5% to 0.1% on the quarter this sparked fresh worries over the domestic outlook.

All in all, the Reserve Bank of New Zealand (RBNZ) looks set to remain on hold for some time to come, to the detriment of NZD exchange rates.

Canadian Dollar (CAD)
Stronger oil prices failed to offer much support to CAD exchange rates, with markets more concerned by the uncertainty surrounding NAFTA.

With the US continuing to adopt a protectionist outlook the future of the trade agreement looks to be in some degree of jeopardy.

However, if this afternoon’s Canadian retail sales data proves encouraging this could boost the Canadian Dollar in the short term.

As of Thursday, 25th January 2018, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.142, GBP USD exchange rate was 1.4147, GBP AUD exchange rate was 1.7626, GBP NZD exchange rate was 1.9362, GBP CAD exchange rate was 1.7516, and GBP CNY exchange rate was 8.9483.
Dominic Lee About Author: (443 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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