US dollar skyrockets as Trump’s TikTok ban reignites US-China tensions
The US dollar roared high on Friday on a wave of market jitters in response to flaring US-China tensions.
Meanwhile, the pound is trading in a narrow range at the start of this week’s session, with GBP/EUR stable at €1.1093 and GBP/USD flat at $1.3063. GBP/CAD is rangebound at C$1.7486, while GBP/AUD and GBP/NZD hold steady at AU$1.8253 and NZ$1.9804, respectively.
Looking ahead, the focus this week looks to be on the UK’s latest GDP figures. Will a sharp plunge in growth send Sterling tumbling?
What’s been happening?
The US dollar soared at the end of last week’s session as demand for the safe-haven currency was turbo charged by renewed tensions between the US and China.
This was triggered by Donald Trump signing an executive order to ban Chinese apps TikTok and WeChat in the US as well as the announcement of sanctions on Hong Kong’s chief executive Carrie Lam.
However, these gains were tempered somewhat by the latest US payroll release, as despite beating expectations, analysts warned the report pointed to a deceleration in employment growth.
This surge in the US dollar weighed on the euro on Friday due to the negative correlation between the pairing, leaving the single currency subdued despite a positive German industrial production print.
The pound, meanwhile, struggled to find momentum at the end of the week after Chancellor Rishi Sunak ruled out any extension to the government’s furlough scheme, which stoked concerns of an impending UK unemployment crisis.
What’s coming up?
Centre stage this week will be the UK’s preliminary GDP estimate for the second quarter.
There has been considerable speculation by analysts throughout the coronavirus crisis that the UK is facing the sharpest decline in growth out of all the major economies.
This is likely to be reflected in Wednesday’s figures as economists forecast a startling 20% plunge in growth, confirmation of which looks to curtail the pound’s recent bullish run this week.
For EUR investors the focus this week will be on the latest ZEW economic surveys, with another improvement in sentiment this month likely to buoy the Euro.
In the meantime, this week’s data will be kicked off by this afternoon’s JOLT figures from the US. Will another fall in job openings last month put pressure on the US dollar today?
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