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Pound US dollar exchange rate: GBP flat as Chinese media warns US over rare earth exports


Chinese newspapers have added to trade tensions between the China and US overnight by printing veiled warnings to the US over vital rare earth mineral exports, which saw investors run to the safe-haven US dollar for cover. Last week, Chinese President Xi Jinping visited a rare earth minerals processing plant, sparking suggestions that China would use its dominant position as an exporter of these to the US as a way to hit back at the United States. The Chinese government has not explicitly said it would restrict rare earth sales, however media in China has suggested that this will happen. The People’s Daily newspaper commented on the “uncomfortable” dependence the US has on rare earths from China.

The paper said: “Will rare earths become a counter weapon for China to hit back against the pressure the United States has put on for no reason at all? The answer is no mystery.

“Undoubtedly, the US side wants to use the products made by China’s exported rare earths to counter and suppress China’s development.

The Chinese people will never accept this! … Don’t say we didn’t warn you!”

Rare earth minerals are considered vital for hi-tech products, including green energy infrastructure, and China has a stranglehold on their production and supply, although their extraction is often highly damaging to the environment.

Meanwhile, data released by the British Retail Consortium (BRC) revealed that UK shop price inflation had jumped from 0.4 per cent to 0.8 per cent in April.

This is the second highest growth rate in the last six years, although the data had no impact and the GBP/USD pairing remained muted. 

Commenting on the data, BRC Chief Executive Helen Dickinson stated: “Shop Price growth in May was the second highest rate in the last six years, though it remains well below headline inflation.

“Rising costs associated with the currency depreciation, stockpiling, rising minimum wage and the Apprenticeship Levy, have all put upwards pressure on prices for a while, and it now appears that retailers cannot absorb them any longer.”

Looking ahead to the start of Thursday’s session it is likely the US dollar will rise against the pound following the release of the latest US GDP flash figure.

If data reveals that the US economy has grown more than forecast in the first three months of 2019, it could buoy the greenback.

However, later in the afternoon the dollar could suffer some losses following the release of the US pending home sales. 

If pending home sales slide further than forecast in April, sentiment in the US dollar could slide back down again.



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