The US dollar continued its steady increase against the pound yesterday as the pair continued to trade between 1.29 and the low 1.30 mark yesterday. Clear signs of underlying inflation pressures in the US supports a downside move towards 1.27 and 1.28.
However, current geopolitical developments and rising US-North Korea tensions could see the dollar remain stable, thereby limiting any material downside below 1.30 within the next few months. The fact is that nobody is too sure what is going to happen and how market sentiment will materialise. Several economists have suggested that traders are more worried than they are letting on, but this is pure speculation at this moment in time.
Today we have PPI and unemployment claims data from the US, but it is fair to say the world will be watching for any further Trump statements on the subject of North Korea, especially given that the US Secretary of State, Rex Tillerson urged calm. Whether Trump will toe the same line or assert his authority is anybody’s guess.