The pound is rangebound against the US dollar and many of the currency’s other peers this morning as sterling continues to build on recent stability. The US dollar and the euro have experienced dramatic movement over the last couple of days, mostly as a result of concerns surrounding US-China trade. Amid this volatility, Sterling has surprised by remaining firm, with recent Brexit headlines failing to propel GBP exchange rates.
This comes in spite of rising odds that the UK risks a no-deal Brexit in October with the UK and EU still deadlocked over the Irish backstop.
Observers suggest Boris Johnson could face a vote of no-confidence over his stance on a no-deal Brexit, though there’s no guarantee MPs could force a general election before the end of October.
At the same time, the US dollar trades in a narrow range this morning after St. Louis Federal Reserve President, James Bullard, curbed Fed rate cut speculation yesterday.
Sales of USD on Tuesday came after escalating trade tensions between the US and China fuelled market fears for additional rate cuts from the Fed .
However Mr Bullard, a known policy dove, quelled fears by suggesting the Fed already took potential trade volatility into account when it cut rates last month.
Mr Bullard said: “I don’t think it is realistic for the Fed to respond to each threat and counter threat in a tit-for-tat trade war.”
Looking ahead, publication of the UK’s latest GDP figures is likely to dominate movement in the GBP/USD exchange rate through the second half of the week.
This is likely to see the pound come under significant pressure as economists forecast a stagnation, maybe even contraction of UK economic growth for the second quarter.
Accompanying the GDP figures will be the UK’s business investment report, expected to reveal an investment slump in Q2.
Meanwhile, for US dollar investors the focus remains on trade headlines, with mounting tensions between the US and China likely to impact USD.
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