By Amanda Cooper LONDON (Reuters) -The pound rose on Monday, getting a tailwind from a degree of relief that U.S. President Donald Trump may not make good on his threat last week to hit Chinese goods
Sterling gets a lift as nerves over US-China tariffs recede
Impact of US-China Tariff Developments on the Pound
By Amanda Cooper
Market Reactions and Investor Sentiment
LONDON (Reuters) -The pound rose on Monday, getting a tailwind from a degree of relief that U.S. President Donald Trump may not make good on his threat last week to hit Chinese goods with 100% tariffs, which gave risk-linked assets a boost.
Upcoming Economic Indicators
In a lengthy post on his Truth Social network on Friday, Trump threatened to impose duties from November 1 on Chinese goods in retaliation for Beijing's decision to restrict exports of critical rare earth materials, triggering a hefty sell-off on Wall Street, in bitcoin and in riskier currencies like sterling.
Bank of England Insights
By Monday, investors recovered some poise, based on Trump's apparent back-pedalling the previous day. "Don’t worry about China, it will all be fine!" he wrote on Truth Social.
Sterling, which tends to benefit from risk appetite, much like the Australian dollar, stocks or crypto, was up 0.24% at $1.3365, making it one of the better performing major currencies against the U.S. dollar.
The key risk event for the pound this quarter will be the November budget. For now, investors will parse through UK employment data, including wage growth, on Tuesday, as well as economic activity for the three months to August on Thursday, to try to get a sense of where British interest rates may be headed.
"UK data have stabilised anew - we will closely monitor labour market data and August GDP this week, fundamentals are more solid than markets appreciate, and short positions are crowded," strategists at Barclays said.
Six of the nine Bank of England rate-setting committee members will speak this week and, with the central bank's next meeting not until November 6, investors will be listening carefully for any hint of where monetary policy may go in the coming months.
Money markets show traders expect no change in rates when the BOE meets next and are only pricing in the next cut by March at the earliest. UK inflation is still running above the central bank's 2% target and a large share of the price pressures are in parts of the economy the BOE cannot easily target, such as wages and the services sector.
(Reporting by Amanda Cooper; Editing by Mrigank Dhaniwala)
