The Pound has had a less than positive week, falling from levels of 1.40 against the US Dollar (GBP/USD) to 1.37 by the end of the week.
The Sterling exchange rate had a positive start to the week on the back of Bank of England (BoE) interest rate comments, but then went on to hit a few stumbling blocks on account of Brexit. On Wednesday, GBP/USD reached a three-week low as Michel Barnier reminded the world that a Brexit transition wasn’t guaranteed. On Thursday the Pound sank further as David Davis warned the EU that the UK wouldn’t pay its multi-million Brexit divorce bill if negotiators didn’t rescind their demands over the Irish border.
Meanwhile, in the States, Trump caused some Dollar weakness when he vowed to raise tariffs and started tweeting about a trade war. Trump announced that the US would soon be imposing tariffs on steel and aluminium imports. However, other countries have hit back (such as China and Canada) and there could be further retaliatory issues as time goes on.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!
— Donald J. Trump (@realDonaldTrump) 2 March 2018
Markets tanked on the news, and some industry experts even believe that these actions could lead to devastating economic consequences.
ING’s Robert Carnell commented:
‘The world stands on the brink of a trade war as Donald Trump announces severe tariffs on steel and aluminium… this is how recessions start. Trade is just about the only thing economists are agreed on – more is better.’
Meanwhile, Theresa May is making her Brexit speech, which outlines her five tests for the Brexit trade talks. May also hit back that the UK was cherry-picking, saying: ‘If this is cherry-picking, then every trade arrangement is cherry-picking.’
On her approach to Brexit negotiations, May stated:
‘The approach I have set out would: implement the referendum result, provide an enduring solution, protect our security and prosperity, helps us build the kind of country we want to be, and bring out country together by commanding confidence of those who voted Leave and Remain.’
The Pound to US Dollar (GBP/USD) exchange rate is currently trending at 1.3773.