The pairing stabilised despite reports of cross-party Brexit talks reaching an impasse, with Jeremy Corbyn saying the Conservatives wanting to “do a deal with Trump”. Meanwhile US industrial production figures for March fell below expectation, dampening enthusiasm for the US dollar. Stephen Stanley, Chief Economist at Amherst Pierpont Securities, blamed the poor industrial figures on a number of factors. He said: “The factory sector has taken the brunt of the dislocations associated with tariffs and uncertainties around trade policy as well as dealing with the headwind of a stronger dollar.
“Thus, it is not surprising that manufacturing activity is underperforming the overall economy.”
The US dollar has been further undermined by robust Chinese economic data today, with traders moving into riskier currencies as Chinese credit floods markets.
Michael Hirson, a former US Treasury Department official, noted that China’s growth is improving and this could weigh on President Donald Trumps’ recent announcement that the nation’s economic slowdown would make them “desperate for a deal”.
Greenback traders are looking ahead to the publication of the US trade balance figures for February, and with any signs of improvement, this could buoy the US dollar to pound exchange rate.
The pound, meanwhile, failed to benefit from the latest UK CPI figures for March, which fell below forecasts to 1.9 percent.
The Office for National Statistics saw the inflation data driven by rising motor fuel prices along with clothing, which increased the cost of living further in March.
These were followed by the UK PPI figures for March, which dropped by -0.2 percent.
Most Sterling traders will be awaiting a speech later on by Mark Carney, the Governor of the Bank of England, with any bullish comments about the state of the UK economy by the central banker liable to give the pound a boost.
The pound US dollar exchange rate will likely be affected by Brexit developments this week, despite most MPs enjoying the parliamentary Easter recess.
Tensions are running high following comments from the Belgium MEP Guy Verhofstadt, who condemned the British MP’s attitude to ongoing Brexit discussions, with Mr Verhofstadt criticising the perceived lack of urgency among British MPs to work on Brexit.
He said: “[T]he first decision the House of Commons took … was to go on holidays.”
Any further sentiment such as this coming from the EU is liable to limit the pound’s value against the US dollar in the days ahead.