In a slightly interesting turn of events, we saw sterling regain some of its strength throughout Tuesday, as sterling was at 1.1765 against the euro, and the dollar slipped so we saw the pound coming in at 1.3003 at the time of writing. This can be attributed to a couple of reasons, relating very much to decisions by Donald Trump and the US Government.
Dollar Weakens Following Trump Comments
We saw the dollar drop against rivalling currencies yesterday as the markets reacted to Donald Trump’s rhetoric on trade talks with China and tariffs on French exports.
The President of the US said that any talks of a “phase one deal” with China could be delayed until after November 2020- the next US presidential election. This is contrary to what had been mentioned previously, with the markets expecting phase one to be agreed and finalised before the end of 2019.
This adds to the decision by the Office of the US Trade Representative (USTR), which published a recommendation that tariffs of up to 100% should be implemented on US imports of French products. This would amount to $2.4bn a year. The recommendation comes as a response to French President Emmanuel Macron’s digital services tax comes into play next year.
The USTR claims the tax unfairly discriminates against American companies, is highly burdensome for impacted companies, and is not compliant with international tax conventions.
Retail and Manufacturing Boosts Sterling
The publication of the latest Manufacturing PMI report with favourable data for the UK has given the pound a bit of a boost, but the services industry still props up the markets in the UK, with it being a relatively long time since anything else was overly meaningful for sterling.
The British Retail Consortium, the trade association representing retailers, published a report which highlights that November saw decent consumer spending in the UK. Retail spending is giving the economy a little uplift in a time of great uncertainty due to the general election and Brexit.
However, it’s also important to remember that this time of year it’s relatively natural to have an increase in consumer spending. With Christmas around the corner, brands tend to be offering discounts to incentivise spending. We will only truly know how well the overall economy has done in the early months of 2020.
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