In a continuation of last week’s troubles, the US dollar has been weakened by worries that the US-China trade spat could soon escalate.
The ball is currently in the US’s court, with trade officials seemingly poised to impose fresh tariffs on Chinese imports.
Ahead of any further action, Chinese state newspaper The Global Times has warned that the nation will retaliate against any additional tariffs, saying:
“It is nothing new for the US to try to escalate tensions so as to exploit more gains at the negotiating table.
“We are looking forward to a more beautiful counter-attack and will keep increasing the pain felt by the US.”
Tensions remain high in both nations and the situation risks further weakening the US dollar to the advantage of the pound.
On the other side of the currency pairing, the pound has appreciated despite the handicap of a negative British Chambers of Commerce (BCC) forecast.
BCC officials have cut their growth predictions for 2018 and 2019, slashing estimates from 1.3 percent to 1.1 percent this year and from 1.4 percent to 1.3 percent next year.
BCC Director General Adam Marshall has blamed Brexit process for this downgraded outlook, saying:
“Brexit uncertainty continues to weigh heavily on many firms, as most of the practical questions facing trading businesses remain unanswered.”
This gloomy forecast comes as Brexit talks continue; at present, it remains to be seen if negotiators will be able to conclude discussions by the provisional November deadline.
This week’s first significant data release isn’t due until Wednesday, when UK inflation figures will come out.
August’s stats are expected to show a slower pace of price growth for the year-on-year reading, but a monthly acceleration from 0 percent to 0.5 percent is forecast.
Annual readings are usually considered more high-impact by the markets, so a monthly rise might not be enough to boost GBP demand.
The issue is that lower annual inflation could reduce the odds of the Bank of England hiking interest rates in 2018 as it would decrease the pressure on policymakers to do so.