Pound US dollar exchange rate: GBP muted as Huawei arrest rattles markets
The pound US dollar exchange rate is currently trading at $1.272 (Image: GETTY)
The pound is stuck in a narrow range against the US dollar this morning as the sudden arrest of a senior executive from Chinese telecoms giant Huawei rippled through markets. Meng Wanzhou, the firm’s global chief financial officer, was arrested in Canada earlier this month and now reportedly faces extradition to the United States. The arrest, understood to have happened on December 1, is related to alleged violations of US sanctions, according to reports. Observers fear the arrest could reignite tensions between the US and China.
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It comes just days after President Donald Trump and President Xi Jinping agreed to a temporary truce on further trade tariffs.
This has helped to buoy the US dollar this morning, as jittery investors sell off stocks and shun risk sensitive currencies in favour of safe-haven assets.
Jasper Lawler, Head of Research at London Capital Group, said: “Asian markets and US futures plummeted overnight as news broke that Huawei’s CFO had been arrested in Canada to be extradited back to the US.
“Traders have quickly moved out of riskier assets reflecting nerves that the arrest is likely to escalate tensions between the US and China once again.”
Asian markets and US futures plummeted overnight as news broke that Huawei’s CFO had been arrested in Canada to be extradited back to the US
At the same time the pound is rangebound this morning as markets remain wary of the UK currency in the run up to next week’s Parliamentary vote on Theresa May’s Brexit deal.
A Reuters poll published earlier this morning suggests Sterling could fall as much as 2.75 per cent next week if MPs vote to reject the deal, amid fears it would greatly increase the risk of a no-deal Brexit.
This has unnerved many GBP investors as considerable opposition to Mrs May’s deal makes it look all but certain that she will be defeated next week.
Looking ahead, a slew of US economic data is scheduled for release later this afternoon, which could put pressure on the pound US dollar exchange rate, especially if US service sector growth is shown to have remained robust in November.
However the US dollar could retreat later in the evening following Jerome Powell’s testimony in front of Congress.
If the Chair of the Federal Reserve continues to strike a dovish tone regarding the pace of future rate hikes we’ll likely see a rise in the pound US dollar exchange rate.
Meanwhile the publication of Halifax’s latest UK house price index could drag on the pound on Friday if price growth slowed in November, as forecast.