The pound has continued to rise against the US dollar today, although compared to Monday the latest pound US dollar exchange rate advance is smaller.
This is a continuation of the relief rally that started yesterday when Brexit Secretary Dominic Raab spoke of continuing negotiations in good faith.
Elsewhere, Bank of England (BoE) policymaker Gertjan Vlieghe has stated that changes to the BoE’s quantitative easing (QE) program should be clearly communicated.
As this statement does not relate to more high-impact monetary policies such as interest rates, the pound has not been moved much by this remark.
There has been limited US economic news out today, so US dollar traders have instead been focusing on Wednesday’s Federal Reserve meeting.
Fed policymakers are expected to raise interest rates from 2 per cent to 2.25 per cent.
Beyond a potential rate hike, there has been concern that the US-China trade conflict will get worse before it gets better.
Both nations imposed fresh tariffs against one another on Monday and could further escalate the situation with additional tariffs in the future.
This development has had a clear limiting effect on the pound US dollar exchange rate, as traders consider whether the tariffs will harm US businesses and households.
Meanwhile, analysts at Mizuho Bank have predicted that it might take a sea change in attitudes on both sides before a truce could be discussed.
They said: “Given these developments, it is increasingly likely that both sides will not resume negotiations for some time, at least until there is a noticeable shift in the political mood on either side.”
The above-mentioned Fed interest rate decision tomorrow evening will be the next major economic news and could cause the pound US dollar exchange rate losses if rates are raised.
Beyond this, there will be more high-impact US data in the form of Thursday’s durable goods orders and GDP growth rate readings.
More orders are expected alongside a 4.2 per cent rise in the pace of Q2 GDP growth.