Pound US Dollar (GBP/USD) Exchange Rate Falls ahead of UK-EU Brexit Negotiations
The Pound Sterling US Dollar (GBP/USD) exchange rate slipped and the pairing is currently trading at around $1.2298.
Sterling was left under pressure as French President Emmanuel Macron told the British Prime Minister that the EU will decide at the end of the week whether or not a Brexit deal is going to be possible.
A French government official has said the French leader told his British counterpart ‘that the negotiations should continue swiftly with Michel Barnier’s team in coming days, in order to evaluate at the end of the week whether a deal is possible that respects European Union principals.’
Meanwhile, Boris Johnson has said that the bloc should not be ‘lured’ into thinking that there will be a Brexit delay.
Added to this, an anonymous senior Number 10 source has said:
‘The UK has made a big, important offer but it’s time for the Commission to show a willingness to compromise too. If not the UK will leave with no deal.’
The increased Brexit pessimism caused the Pound to slump against the US Dollar at the start of this week’s session.
US Dollar (USD) Rises Ahead of Face-to-Face US-China Talks
US-China trade talks are scheduled to begin this week, with deputy-level talks set for Monday and Tuesday, and top-level talks on Thursday and Friday.
In the run-up to talks, both sides have been mixed, and the chances of a US-China trade deal being reached remains low.
However, this did little to stop the safe-haven US Dollar rise against the Pound.
Commenting on this, in a note, analysts from DBS Bank in Singapore wrote:
‘The odds remain low for a trade deal. Washington wants to get the whole deal done but Beijing is unwilling to do so without the US rolling back tariffs.’
A report from Bloomberg revealed that Chinese officials are signaling they are reluctant to agree to a broad deal that the US President Donald Trump is pursuing.
Commenting on this, Asia-Pacific chief economist at ING, Rob Carnell said:
‘Nothing is yet in the bag, and optimism on trade has proved time and again to be misplaced.’
Fed George: Bank Should Not Cut Rates to Boost Inflation
On Sunday, the Kansas City Federal Reserve Bank President Esther George said that the central bank should not cut rates to attempt to boost inflation.
She noted the weaker inflation was largely due to global forces, and monetary policy could provide little support.
This likely provided the US Dollar with a slight upswing of support as markets have priced in further Fed rate cuts in the future.
Speaking at the National Association for Business Economics in Denver, George said:
‘In current circumstances, concern about low inflation seems unnecessary. The US economy is currently in a good place, with low inflation, low employment and an outlook for continued moderate growth.
‘If I saw the consumer losing their confidence, and that could happen, then I might rethink. I think about this latest round of tariffs that will largely hit the consumer, and to what extent that might cause a reaction.’
Pound US Dollar Outlook: Will Inflation Buoy USD?
Looking ahead to Tuesday, the US Dollar (USD) could rise against the Pound (GBP) following the release of US inflation data.
If the Producer Price Index (PPI) edges closer to the Federal Reserve’s inflation target, it is likely the ‘Greenback’ will receive an upswing of support.
Meanwhile, the Pound is likely to be left under pressure as the Brexit deal decision deadline approaches.
If reports suggest the likelihood of the UK and EU reaching a deal by the end of the week is unlikely, it could cause the Pound US Dollar (GBP/USD) exchange rate to slide.