GBP/USD is up slightly in the Monday session. In North American trade, the pair is trading at 1.2610, up 0.18% on the day. On the release front, the Empire State Manufacturing Index dropped sharply to 10.9, down from 23.3 points in the previous release. This was well short of the estimate of 20.1 points. Later in the day, the U.K. releases Rightmove HPI, which is expected to decline by 1.5%. On Tuesday, the U.S. releases housing starts and building permits.
With constant twists and turns in the Brexit saga, traders shouldn’t be surprised that the British pound has responded with volatility. Last week was a roller-coaster for the currency, as GPB/USD moved over 1 percent on two separate days last week. The volatility was in response to last week’s dramatic events surrounding Brexit. Prime Minister Theresa May survived an internal non-confidence motion in the Conservative party. However, one-third of Conservative MPs voted against May, leaving the prime minister in a weak position, ahead of a parliamentary vote on Brexit, which will likely be held in January.
The EU has insisted that the withdrawal agreement will not be reopened, and May was unable to extract any concessions from the EU on a whirlwind trip last week. May will have a tough time pushing the deal through parliament, and if she is not successful, Britain could well be on its way to leaving the EU without a deal, which would have a chilling effect on the U.K. economy and the British pound.
U.S. retail sales climbed in November, but the gains were muted compared to October. Core retail sales dropped from 0.7% to 0.2%, while retail sales declined to 0.2%, down from 0.8%. Still, retail sales managed to beat the estimate of 0.1%. Lower oil prices have boosted consumer spending, which is expected to look strong in the fourth quarter. Inflation has dipped of late, CPI dropped to 0.0% in November, down from 0.3% a month earlier. This marked the lowest level since May. Core CPI remained pegged at 0.2 percent. The weak readings can be attributed to falling oil prices, which has led to a sharp decline in gasoline prices. On an annualized basis, inflation gained 2.2 percent in November, down from 2.5 percent in October.
