Trade tensions back on the table
The arrest of the global chief financial officer of telecoms equipment maker Huawei, Meng Wanzhou, who is also the daughter of Huawei’s founder, has rocked Asian markets last night. Her arrest by Canadian/US authorities on charges of violating sanctions against Iran could re-escalate the trade tensions between Washington and Beijing, just days after the two leaders agreed a truce. The USD hasn’t reacted yet to the news as investors still hope for more gains, thanks to stronger recent manufacturing activity and a relatively upbeat Beige Book assessment. According to the Fed, the economy is doing well, with rising prices, tighter labour markets and increasing wage growth. Investors are now waiting for Friday’s non-farm payrolls report, hoping that job growth will be strong enough to revive the dollar’s rally.
The UK government has only five days left until members of Parliament vote on the Prime Minister’s Brexit deal but things aren’t looking pretty so far. There was even a report from The Times that Cabinet members had told PM May to pull the vote. If the deal is rejected, it would open the door to either a softer Brexit, a second referendum or no Brexit at all. However, the Democratic Unionist Party has already warned that if the deal goes through, it will bring the government down in a no-confidence vote. The Telegraph has suggested that EU leaders could offer May an extension of the negotiating period beyond March 29 at the next EU summit next week as a way of avoiding no-deal. Currently trading at 1.27 against the USD and 1.1210 against the euro, the pound remains under pressure and the threat of a 10 per cent drop in value in case of a no-deal is still real.
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