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The pound has climbed to its highest level against the dollar in over a week this morning.

Sterling is up a quarter of a cent today at $1.3455, the strongest level since 7 October.

ShareDollar on track for worst week since August

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

It’s been a rough week for the US dollar, which is set for its biggest weekly drop in two and a half months.

Rising trade tensions between the US and China, and worries that America’s economy may be weakening, have pulled down the greenback against other currencies this week.

The dollar index, which tracks its performance against a basket of currencies, has lost 0.95% so far this week – the biggest five-day drop since early August.

A chart showing the US dollar index’s weekly moves Photograph: LSEG

The dollar weakened after Donald Trump threatened new 100% tariffs on China in a row over its rare earth exports last Friday.

Earlier this week, US trade representative Jamieson Greer claimed those export restrictions were a “global supply-chain power grab”, denting hopes of détente between Washington and Beijing.

Concerns about the US economy – which is currently in an economic data blackout due to the government shutdown – is encouraging some investors to diversify away from assets such as the dollar, and Treasury bills, into harder assets such as gold.

Suspicions that US interest rates could be cut steadily in the months ahead are also weighing on the dollar.

Raffi Boyadjian, lead market analyst at Trading Point, explains:

The US dollar…has been sliding since trade relations started to worsen again. Against a basket of currencies, the dollar tumbled to a more than one-week low today before recovering slightly.

Fed Chair Powell’s remarks this week have also been weighing on the greenback. An October rate cut is almost certain after Powell once again emphasized the growing downside risks to the labour market, even in the absence of official payrolls data.

The ongoing government shutdown is another risk that could upend the dollar’s mini rebound since mid-September.

The agendaShare

Updated at 08.31 CEST