Dollar Ticks Higher on Trade Fears, Pound Sinks

Investing.com - The dollar ticked up to almost two-week highs against a currency basket on Tuesday amid fears that the U.S.-China trade war could escalate, while the pound weakened following U.S. President Donald Trump’s warning that the Brexit deal is bad for the UK.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.15% at 97.12 by 04:37 AM GMT (09:37 AM GMT), the most since November 15.

Demand for the dollar was underpinned by a resurgence of trade fears in the wake of Trump’s threat to hike existing tariffs on China, and possibly extend them to all Chinese imports.

In an interview with the Wall Street Journal, Trump said it was “highly unlikely” that he’d accept an offer from Chinese President Xi Jinping to avert new tariffs due to come into effect in January.

Investors had hoped that talks due to take place between Trump and his Chinese counterpart at this week’s G20 summit could lead to a ceasefire in the trade war.

The pound was weaker, with GBP/USD down 0.6% to 1.2753 after the U.S. president said that British Prime Minister Theresa May's Brexit agreement looks like a “great deal for the EU” that would stop the UK trading with the U.S.

Trump’s comments are likely to weaken May’s hand at a time when she is seeking to get the deal approved by parliament.

Sterling was also lower against the euro, with EUR/GBP rising 0.35% to 0.8873.

The euro was holding steady against the dollar, with EUR/USD last at 1.1323.

The dollar was little changed against the safe haven yen, with USD/JPY changing hands at 113.62.

Investors were turning their attention to a speech by Federal Reserve Chairman Jerome Powell and the Fed’s November meeting minutes on Thursday, for further indications on the future path of interest rates.

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