Sterling was trading with more than half a percent increase versus the American greenback this afternoon, reaching as high at $1.2790. Against the euro, the pound was also up by around the same margin, trading up 0.66 percent to €1.1170. The positive movement for the pound US dollar exchange rate is believe to have been sparked by hopes of an end to the trade dispute between the United States and China. US President Donald Trump tweeted on Sunday that he had a “long and very good call” with his Chinese counterpart Xi Jinping and that a possible trade deal between the two economic powerhouses was progressing.
China and the US have been at loggerheads for much of 2018, leaving investors and world financial markets on edge as the nations batter each other with strings of sanctions.
The flow of hundreds of billions of dollars worth of goods between the world’s two largest economies has been disrupted by tariffs.
But the outlook for the US dollar is less prosperous going into 2019.
Expectations are growing that a three-year cycle of rate increases in the US is coming to a close.
Market expectations for no more rate hikes next year stand at nearly 80 percent compared to only a quarter a month-ago, according to the CME Fedwatch tool.
Alvin Tan, a currency strategist at Societe Generale in London, said: “Along with growing expectations of no more rate hikes, the familiar issues of the twin deficits is expected to weigh on the dollar next year.”
While the dollar has been relatively stable going into the end of 2018, concerns are growing over the longterm outlook.
The US 10-year Treasury bond yield was at 2.71 percent on Monday, down nearly 30 basis points in December.
Sterling has been battered this year by Brexit uncertainty and has lost more than 6 percent of its value versus the US dollar this year.
The Australian dollar gained 0.4 percent to $0.7063 against its US counterpart but on the year is down 10 percent.