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Pound US Dollar Exchange Rate Edges Higher as US-China Trade Uncertainty Weighs on ‘Greenback’

GBP/USD Exchange Rate Improves as US Investors Remain Cautious Ahead of Fed Rate Decision

The Pound US Dollar (GBP/USD) exchange rate edged higher today, with the pairing currently trading around $1.318 as the ‘Greenback’ continues to struggle over US-China trade uncertainty and rising concerns ahead of the Federal Reserve’s monetary policy statement on Wednesday.

Scott Brown, Chief Economist at Raymond James, commented:

‘The dot plot and Chair Powell’s press conference should suggest that policy will remain on hold for the foreseeable future (although the Fed will ease if conditions warrant).’

US Dollar (USD) investors are also becoming increasingly jittery ahead of the December 15 deadline for Washington to form new tariffs on Chinese goods, a move that could beleaguer US-China trade developments and slow down the possibility of a trade deal between the two superpowers.

Shi Yinhong, Director at the Centre on American Studies at Renmin University, was downbeat in his assessment, saying:

‘A deal that is implementable must be concrete and detailed, which I don’t think can be concluded within days of December 15. China is unlikely to give a specific commitment on how much US agricultural products it would buy.’

In US economic data, USD was generally unmoved after the US Nonfarm Productivity figure for the third-quarter fell to a weaker-than-expected -0.2%.

GBP/USD Exchange Rate Edges Higher Despite Flagging UK Economic Growth

The Pound (GBP) rose against the US Dollar (USD) despite the UK GDP figure for October falling below forecasts and stagnating at 0% in its slowest rate of growth since 2009.

Professor Costas Milas, an Analyst at the University of Liverpool, commented:

‘The main point is that our economy continues to disappoint badly, which will probably bring a Bank of England interest rate cut much closer especially if Thursday’s election turns out very inconclusive.’

Today also saw the release of October’s industrial production figure, which also fell below expectations to 0.1%.

Fhaheen Khan, a Senior Economist at Make UK, added:

‘Overall, a weakening of the manufacturing sector has hampered growth and measures to unlock the growth potential of the sector through a reinvigorated industrial strategy must be a key feature for policymakers next year.’

However, the Pound (GBP) continues to be moved by British political developments ahead of Thursday’s general election, with ‘economic data [continuing] to play second fiddle’, according to ING analysts.

GBP/USD Outlook: UK General Election Developments in Focus

US Dollar (USD) traders will be looking ahead to tomorrow’s rate decision from the Federal Reserve, which is expected to hold at 1.75%.

However, any dovish commentary in the Federal Open Markit Committee press conference could weaken market confidence in the ‘Greenback’.

Tomorrow will also see the publication of US inflation data, which is expected to hold steady at 0.2% in November.

UK political developments ahead of this Thursday’s general election will continue to drive the GBP/USD exchange rate this week, with any signs of the Labour Party narrowing the gap between the Tories in the opinion polls weakening Sterling on heightened fears of a hung parliament.