The Dollar has calmed down after a period of volatility; the Pound Sterling is under surveillance

By Peter Nurse

The dollar was stable at the beginning of the european session on Tuesday, after a few exchanges volatile in the asian session on the back of the uncertainty surrounding the position of the trade agreement between the United States and China.

Has 10h35, the dollar index, which tracks the greenback against a basket of six other currencies, remained almost unchanged at 96,993 after having climbed up to 97,207 in the beginning of the session.

The USD/JPY rose 0.3 % to 107,19, the EUR/USD rose 0.1 % to 1,1268, while the AUD/USD rose 0.1 % to 0,6911, after having fallen to 0,6858.

The dollar has soared and the currency sensitive to risk, such as the australian dollar has weakened after the business advisor of the White House, Peter Navarro, has said that the trade agreement with China was “finished”.

These movements, however, have not lasted for long, because Navarro has quickly backtracked, stating that his comments had been “taken out of context”.

The american president Donald Trump has given additional assurances by tweeting that the agreement was “still intact”.

Tensions between Washington and Beijing are already bright, and the comments of Navarro have rekindled the memories of the war trade between the two countries, which has undermined the financial markets and began the process of global growth before being partially resolved by the agreement in January.

The pound sterling is another currency that has been featured lately.

The Bank of England has increased its quantitative easing program last week, but it has also been suggested that the pace of its asset purchases is expected to decrease in the rest of the year.

However, the pound sterling was not able to get support from this fact because of concerns about the depth of the economic downturn, which means that the market remains focused on the chances for the Bank to reduce the rate below zero in the future. In addition, the negotiations with the EU on trade relations post-Brexit have given little hope of breakthrough.

“It is important for the prospects of the pound sterling since the stalling of trade negotiations between the United Kingdom and the EU suggests that the market will adopt probably an approach that the glass is half empty and will continue to maintain the risk premium in GBP,” said ING (AS:INGA) in a research note.

“This suggests that the pound sterling will continue to fight, as the EUR/GBP will rise to /above 0.91 on this summer, and the GBP/USD will turn to under-perform the EUR/USD,” added ING.

Has 10h35, the GBP/USD gained 0.1% to 1,2471 and the EUR/GBP has risen 0.1% 0.9041.

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