The British pound has started the week with sharp losses. In the North American session, GBP/USD is trading at 1.3200, down 0.4% on the day. Earlier, GBP/USD declined as much as 1.1% before recovering.
US-China tariff deals boosts US dollar
The US-China trade war has roiled the financial markets and dampened the outlook for global growth. Today’s announcement that the US and China have reached an agreement to slash tariffs is a welcome step and marks a major de-escalation between the two largest economies in the world.
The agreeement will suspend the tariffs for 90 days, but the two sides of agreed to continue negotiations. Under the deal, the US and China will slash tariffs by 115%, leaving US tariffs on China at 30% and China’s tariffs on the US at 10%.
The tariff agreement has boosted risk appetite and sent the US stock markets sharply higher. The US dollar is also higher and safe-haven assets such as the Japanese yen and gold have posted sharp losses today.
UK employment and wages expected to weaken
The UK releases the employment report on Tuesday. The economy is expected to fall to 120 thousand in the three months to March, down from 206 thousand in the previous report. The unemployment rate is projected to edge up to 4.5% from 4.4%. Wages including bonuses is expected to ease to 5.2% from 5.6%.
The Bank of England lowered interest rates by a quarter-point last week, bringing the cash rate to 0.25%. On Monday, Clare Lombardelli , BOE deputy governor and Megan Green, a member of the Monetary Policy Committee, said they supported the rate cut but want to see more evidence that inflation is falling before the Bank lowers rates again. Both policymakers said that wage growth and services inflation remained too high to justify further cuts.
GBP/USD Technical
- GBP/USD has pushed below support at 1.3246. Below, there is support at 1.3168
- There is resistance at 1.3279 and 1.3347
