GBP/USD: Dollar Drops vs. Pound As Trade War Fears Ease

The euro US dollar closed the previous session 0.2% higher. The pair failed to move meaningfully through the key level of US$1.11. The pair is advancing in early trade on Tuesday.

In the absence of any eurozone economic data, euro investors focused on Brexit developments in the previous session.  The EU agreed to grant the UK a “flextention” to Brexit. Despite France initially raising doubts, all 27 leaders finally agreed to give the UK until the end of January 2020 to resolve Brexit. The news lifted the pound and the euro. This is because the UK has avoided a no deal Brexit. A no deal Brexit would have also been damaging to eurozone economy.

Today, once again there is no high impacting eurozone economic data. Europe investors will turn their attention to Wednesday, which sees a slew of eurozone data due to be released. The macro data points include French GDP, German unemployment, German inflation and eurozone consumer confidence. Weak data, particularly from Germany could raise concerns that Germany is on the brink of recession. This would raise the prospect of another rate cut from the European Central Bank.

Dollar Investors Look To Consumer Confidence Data

Easing trade tensions helped the US stock market reach a record high and the US dollar move lower in the previous session. President Trump announced that he expected to sign phase 1 of a trade deal with China at the APEC meeting in Chile later next month. This would be ahead of schedule, boosting risk sentiment. When risk sentiment increases, investors often sell out of the safe haven US dollar, the reserve currency of the world.

This week is a busy week for US dollar investors with plenty of high impacting data and events to monitor. Today investors will be looking towards US consumer confidence figures. Analysts are expecting consumer confidence to have increased in October to 128, up from 125.1. The labour market remains strong and wage growth robust which buoys consumer confidence. However, US retail sales declined in September highlighting that there could be a growing unease among the US consumer.

When household sentiment is strong, consumers spend. Therefore, strong consumer confidence is important; especially important given  the reliance of the US economy on consumers spending. A strong reading could boost demand for the dollar.

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 EUR = 1.12829 USD

Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.

Or, if you were looking at it the other way around:

1 USD = 0.88789 EUR

In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.


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