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GBP/USD Exchange Rate Gains after ECJ Statement and Huawei Arrest

Last week’s high: $1.2830

Last week’s low: $1.2678

 

US Dollar Volatile as China Tensions Increase Once Again

The beginning of last week saw the Pound US Dollar (GBP/USD) exchange rate looking strong, as the US and China had agreed upon a trade truce over the weekend during the G20 Summit, which saw investors pull out of the safe-haven USD.

A better-than-expected US ISM manufacturing figure, rising from 57.7 to 59.3, aided the Dollar as it was able to push back against GBP on Monday evening.

A written statement suggesting that the UK could essentially cancel Brexit from the European Court of Justice (ECJ) Advocate General, Manuel Campos Sánchez-Bordona caused the Pound to rise against the Dollar on Tuesday.

Tuesday afternoon saw the GBP/USD exchange rate plummet as Bank of England (BoE) Governor, Mark Carney, suggested that the UK would see a rise in the average food shopping bill following the country’s departure from the European Union.

The news of the arrest of the chief financial officer of Huawei, Meng Wanzhou, in Canada caused fears that US-China trade tensions would flare up again, as she faced extradition to the US.

Friday saw the US unemployment rate remain steady at 3.7%, although the average hourly earnings for November did not grow as expected, only hitting 0.2% from the previous 0.1%, although the Michigan consumer sentiment index for December remained steady at 97.5 despite a forecast decrease.

 

USD Outlook: Rejection of PM’s Brexit Withdrawal Agreement Likely to Bolster US Dollar

The outlook for the US Dollar early in the session this week depends on whether the UK currency is weakened by the rejection of Theresa May’s withdrawal agreement by Parliament.

The ECJ ruling on whether the UK will effectively be able to back out of Brexit is also likely to have a large impact on the GBP/USD exchange rate, as if they follow the previous statements suggesting that this could be a possibility, it could see the Pound bolstered against the Dollar today.

Wednesday will see the release of the US consumer price index excluding food and energy, which is predicted to increase from 2.1% from last November to 2.2% this November, and if this is the case it could see the ‘Greenback’ rally against the Pound.

There is also a speech from the Federal Reserve chair, Jerome Powell, which could cause movement in the Dollar this week depending on whether his tone is hawkish or dovish.

US retail sales figures for November are to be released at the end of this week’s session, and if they were to increase the US Dollar could see a good end to the week, as the GBP/USD exchange rates could drop.

 

Key Events

10th December

09:30  GBP Gross Domestic Product (MoM) (Oct)

11th December

n/a  UK Parliamentary vote on Brexit Plan

09:30  GBP Average Earnings (3Mo/Yr) (Oct)

12th December

13:30  USD Consumer Price Index

15:00  Fed’s Powell Speech

19:00  USD Monthly Budget Statement (Nov)

13th December

13:30  Continuing Jobless Claims (30 Nov)

13:30  Initial Jobless Claims (7 Dec)

14th December

13:30  US Retail Sales

14:15  US Industrial Production (MoM) (Nov)

14:15  US Capacity Utilisation (Nov)

 

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To keep up to date with the US Dollar, visit the USD blog in our Currency News section.

Arron Morris
Currency Trader
T: 01442 892 065

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