The pairing has increased as the US moves ever closer to a trade deal with China, with final discussions due to take place today on implementation of the agreement. Myron Brilliant, an Executive Vice-President for International Affairs for the US Chamber of Commerce, said: “We’re getting into the end-game stage. “We’re getting to the point where it’s clear that both governments want a deal … “Ninety per cent of the deal is done, but the last 10 per cent is the hardest part, it’s the trickiest part and it will require trade-offs on both sides.”
This may have lowered safe-haven demand for the US dollar as traders flock to higher-yielding currencies.
Doubts, however, are rising on whether the deal can be successfully enforced, leaving many traders in the greenback nervous.
Yesterday also saw a drop in US durable goods orders, which has continued to dampen market confidence in the economy.
Today, meanwhile, will see the publication of the US Markit Services PMI figures for March, which are expected to remain static.
These will be followed by the important US ISM Non-Manufacturing PMI figures for March, and with any signs of improvement we could see the US dollar claw back some of today’s losses.
Sterling, meanwhile, has benefited after Prime Minister Theresa May sought a compromise with the Labour leader Jeremy Corbyn in a bid to break the Brexit deadlock.
Cross-party talks have buoyed market sentiment in the pound today, as this has heightened the possibility that the UK will seek a long extension of Article 50 – something long favoured by market movers who consider the pound would drop if the UK leaves the EU acrimoniously.
Mrs May said: “I am taking action to break the logjam: I am offering to sit down with the leader of the opposition and to try to agree a plan that we would both stick to, to ensure that we leave the European Union.”
Divisions in her own party, however, have effectively erupted, leaving many pro-Brexit Conservatives feeling a ‘sense of betrayal’.
Meanwhile, the UK Markit Services PMI for March contracted to 48.9 today, falling below the expected 50.9 and dampening confidence in the UK economy amid continuing Brexit uncertainty.
Duncan Brock, a Group Director at the Chartered Institute of Procurement and Supply, was downbeat.
He said: “A fight for survival beckons if this market stagnation becomes entrenched, the global economy remains downbeat and the Brexit cloud is not lifted.
“[T]his inertia will fast become the new normal unless some major change pulls the sector out of the quicksand.”
The pound US dollar exchange rate will, nevertheless, remain dictated by Brexit developments between Mrs May and Mr Corbyn today, and with any signs that the EU could concede on an extension to Article 50, this could see the pound rise further.
Published at Wed, 03 Apr 2019 09:41:00 +0000