The only release of note yesterday was the eurozone’s inflation rate for August, which came in as expected at 2%. However, there was plenty to talk about, particularly regarding the ongoing threat of a trade war and the potential impacts of a no-deal Brexit. It had been hoped that the US and China could come to an agreement, which would ease fears of a full-blown trade war. However, Trump put paid to that with yet another Tweet which renewed the threat of imposing $200 billion of import tariffs on Chinese imports.
Reports over the weekend appeared to suggest that Trump has already made the decision to impose a fresh wave of tariffs on Chinese goods. If the move goes ahead, it would represent one of the severest economic restrictions ever imposed by a US president. The markets didn’t take too kindly to the news yesterday, with stocks and the dollar weakening as a result. The dollar’s loss was sterling and the euro’s gain, with the pound pushing through the $1.3150 barrier.
Meanwhile, Theresa May gave an interview to the BBC in which she said that she was confident of getting a Brexit deal based on the Chequers plan. The UK Prime Minister also said that the only alternative to the Chequers plan is to crash out of the EU without a deal – something the IMF’s Managing Director, Christine Lagarde, said would have ‘dire consequences’ on the UK economy.
For now, it appears that investors are confident the UK will agree a deal with the EU, but that could all change in an instant. It will be fascinating to see how this whole, prolonged situation plays out and what the eventual outcome is. Today is very quiet on the economic data front, but we can expect more fireworks regarding Trump’s threat and the prospect of a no-deal.
It’s a big risk to leave your budget exposed to this uncertainty where none of us really knows what’s going to happen – a single Tweet can cause the exchange rate to drop. You can, however, control this. Just speak to your Personal Trader on 020 7898 0541 about using a forward contract to lock in the exchange rate.