Pound US dollar exchange rate jumps as Trump lashes out at the Fed

The pound advanced on the US dollar on Tuesday as USD investors were left frustrated by Donald Trump’s latest comments regarding the Federal Reserve.

Sterling is trending narrowly again this morning however, with GBP/EUR stable at €1.1144, GBP/USD subdued at $1.2886 and GBP/CAD flat at C$1.6794, while GBP/AUD and GBP/NZD both hold steady at AU$1.7551 and NZ$1.9265 respectively.

The US dollar may be left on the defensive today if Trump’s comments are seen as undermining the latest Fed minutes.

What’s been happening?              
                                        
The pound generally moved higher on Tuesday as the currency continued to take advantage of thin trading.
Sterling also strengthened despite UK Brexit Secretary Dominic Raab and EU Chief Negotiator Michel Barnier delivering a mixed press conference on the current state of Brexit talks.

The statement left investors wary as Barnier warned that, while the EU was not aiming for a no-deal Brexit scenario, it was still preparing for such an outcome.

However Rabb helped to soothe nerves as he said that he was ‘confident that we can reach a deal in October’.
This prompted some volatility in the GBP/EUR exchange rate on Tuesday evening, with the pairing relinquishing some of the session’s initial gains.

Meanwhile, the GBP/USD exchange rate continued to accelerate on Tuesday as markets remained spooked by comments made by President Trump overnight on Monday as he took a swing at the Federal Reserve’s monetary policy.

In an interview with Reuters, Trump said he as ‘not thrilled’ by the Fed’s decision to pursue higher interest rates, sending the US dollar lower for fears that his remarks could complicate a December rate hike.

What’s coming up?

Looking ahead, the pound could struggle to extend its gains into the latter half of the week, with markets likely to becoming increasingly focused on Brexit.

At the same time the euro also faces an empty data calendar today, potentially limiting any gains in the single currency ahead of Thursday’s PMI readings.

Finally USD investors will be awaiting the publication of the minutes from the Federal Reserve’s August policy meeting today.

While economists are expecting the minutes to paint an upbeat picture of the US economy, any signals that the Fed may be seeking a further two interest rates hikes this year may be undermined by Trump’s recent comments.