Dollar Strengthens as Trade Optimism Wanes, Pound Weakens

Dollar Strengthens as Trade Optimism Wanes, Pound Weakens

On Wednesday, the UK currency declined. It was after hitting a one-month low. This is due to reports that Brexit negotiations between Britain and the European Union were close to splitting up. Meanwhile, throughout the rising trade tensions, the dollar also weakened slightly.

In a telephone call on Tuesday, a source indicated that German Chancellor Angela Merkel had a discussion with British Prime Minister Boris Johnson.

The talk was regarding the agreement being “overwhelmingly unlikely.”

The October 31 deadline is coming close, when Britain is due to quit the EU. The result is deeply uncertain.

Moreover, the British pound fell half a percent to its lowest since early September. On the other hand, it has recovered a fraction of the decrease in Asian trade to hold at $1.2217.

Momentarily, the US dollar moved faster as it gained overnight. It was after the U.S. imposition of visa boundaries on Chinese officials over the treatment of Muslim minorities.

In addition, the restrictions are to disrupt delicate trade negotiations.

Prohibition of Chinese Organizations

The move, together with the banning of Chinese firms over the same issue, became dull over Sino-U.S. talks in Washington. It has also been sending investors to safety.

A Westpac analyst, Imre Speizer in Auckland, stated, “The tensions will persist through to the year-end at least.”

He is also not anticipating the talks to deliver a breakthrough deal.

Imre Speizer added, “It’ll be volatile good news, bad news, repeat for the rest of the year, but overall a negative tone.”

Elsewhere, the safe-haven Japanese yen inched higher, with the dollar buying 107.00 yen.

In other markets, stocks dropped together with the bond yields.

Safe-haven flows had also been supporting the dollar overnight.

This is along with remarks from Federal Reserve Chairman Jerome Powell, which were understood as suggesting further rate cuts later in October. The said agreements were not a done deal.

On Wednesday, the dollar was slightly weaker at 99.126 versus a basket of currencies. Meanwhile, it declined marginally in contrast to the trade-exposed Australian and New Zealand dollars.

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