The British pound is lower against the US dollar on Tuesday after US inflation data came in a little cooler than expected while UK Prime Minister Boris Johnson rejected an official call for a second Scottish referendum. Wider markets showed a mixed reaction to news the United States will no longer officially list China as a ‘currency manipulator’.
GBP/USD was lower by 2 pips (-0.014%) to 1.2986 as of 1.30pm GMT after the currency pair briefly flirted with a rise back above 1.30.
Having fallen beneath the critical $1.30 level at the start of the week, the pound was still struggling to make any headway as of Tuesday afternoon. Losses have perhaps been contained by the announcement by British PM Boris Johnson that he will not allow a second Scottish referendum, otherwise known as indyref2. The first referendum was a deep source of uncertainty for the UK and saw international investors dump the pound in response.
The pound-dollar exchange rate is now much lower than it was in 2014 when the first referendum was held, potentially limiting the downside this time around. Nevertheless, the referendum is widely understood to be unwanted political uncertainty for the United Kingdom. So for the time being at least, the rejection by the Prime Minister removes another downward force on Sterling.
US inflation data was the biggest economic data release of a day absent many other data releases. US CPI for December grew 2.3% year-on-year, up from 2.1% previously. Core prices that strip out energy rose 2.3% y/y too, unchanged from the previous reading. The negative surprise came in the monthly reading, which showed a slower 0.2% rise in the headline number than the 0.3% m/m anticipated, while core prices only rose 0.1% when 0.2% was expected.
The biggest move for the US dollar on Tuesday was against the Chinese yuan, where it fell to a 5-month low against the Chinese currency on the news the US will end its practice of labelling China as a currency manipulator. The move from the US Treasury came in its latest currency report and forms a part of the phase one trade deal between the US and China, where signing is scheduled to take place on Wednesday.