After a listless start to the week, GBP/USD has posted strong gains in the Tuesday session. In North American trade, GBP/USD is trading at 1.3032, up 0.77% on the day. On the release front, British GfK Consumer Confidence remained pegged at 13 points for a third straight month. In the U.S., the Employment Cost Index remained steady at 0.7%, matching the estimate. Chicago PMI dropped sharply to 52.6, down from 58.7 points in the previous release. This missed the forecast of 59.1 points. CB Consumer Confidence improved to 129.2, above the estimate of 126.2 points. Wednesday will be busy as well. The U.K. releases Manufacturing PMI and Net Lending to Individuals. In the U.S., we’ll get a look at ADP nonfarm payrolls and the Federal Reserve issues a rate statement.
The pound has not impressed in recent weeks, but cable could be back in business. After losses of 1.7% in March and a sluggish April, GBP/USD has rebounded this week, gaining close to 1.0%. Still, this could be more a case of broad weakness by the dollar, rather than newfound strength in the pound. British numbers have been lukewarm, and Brexit will continue to weigh on the pound, even with the extension until October. Consumers remain pessimistic about the economic outlook and uncertainty over Brexit, and this gloomy mood has also affected consumer spending.
The Federal Reserve has said it expects to hold interest rate levels for the rest of the year, and the most recent inflation numbers will reinforce that stance. The Core PCE Price Index, which is the Federal Reserve’s preferred gauge for inflation, came in at 0.0% in March and 0.1% in February (the two events were released on Tuesday due to the government shutdown earlier this year). On an annualized basis, the indicator gained 1.6%, just shy of the estimate of 1.7%. There was better news from consumer spending, which jumped 0.9% in March, compared to the estimate of 0.7%. The strong reading was a result of increased spending on motor vehicles and health care.
