Meanwhile, Prime Minister Boris Johnson’s cabinet is denying claims that it wanted talks to fail in order to push through a no-deal Brexit. A spokesman stated the EU “needed to change its stance” as the deal would not pass through Parliament in its current form, and added: “We will throw ourselves into the negotiations with the greatest energy and the spirit of friendship and we hope the EU will rethink its current refusal to make any changes to the withdrawal agreement.”
However, the pound was able to creep higher against the US dollar despite the latest Brexit headlines as Chinese media accused the United States of “deliberately destroying international order”.
At the start of the week, the Chinese yuan fell below the seven-per-dollar level for the first time since 2008, prompting US Treasury Secretary Steven Mnuchin to accuse Beijing of manipulating the yuan “to gain an unfair competitive advantage in international trade.”
Added to this, the US Treasury Department stated it had determined that China was manipulating its currency for the first time since 1994.
Tensions may continue to escalate, and DBS Group Research stated in a note:
“Naming China a currency manipulator could open the door for US tariffs to eventually increase to more than 25 percent on Chinese goods.
“Apart from naming China a currency manipulator, Trump’s election campaign pledge was to lift import tariffs to 45 percent on China.”
Yesterday’s US ISM non-manufacturing report also put pressure on the US dollar by coming in at 53.7 rather than 55.5.
With no influential US data due out until the end of the week the GBP/USD exchange rate will remain reactive to the latest Brexit and trade-related headlines.