GBP/USD has posted is unchanged in the Monday session. Currently, GBP/USD is trading at 1.2645, up 0.11% on the day. On the fundamentals front, the focus is on manufacturing releases. British Manufacturing PMI slowed to 49.4, missing expectations. Later on, the U.K. releases BRC Retail Sales Monitor, with an estimate of 0.9%. In the U.S., ISM Manufacturing PMI dropped to 52.1, short of the estimate of 53.0. On Tuesday, the U.K. releases Construction PMI.
It was a sour start to the week for British fundamentals, as manufacturing PMI dipped below the 50-level, which separates expansion from contraction. The PMI dropped to 49.4, marking the first contraction since July 2016. Although the pound has held its own on Monday, the unexpected contraction could unnerve investors and weigh on the pound. Manufacturing news from the U.S. also disappointed, as ISM Manufacturing PMI slowed to 52.1, down from 53.0 a month earlier. Global demand has fallen off trade tensions, and unless this situation improves, manufacturing sectors across the globe will remain under strong pressure.
The U.S. economy continues to perform well, with first-quarter growth above the 3% level. Second estimate GDP posted a gain of 3.1%, matching the estimate. This was just shy of the initial estimate in April, which came in at 3.1%. The U.S. economy is firing on all cylinders, despite the nasty trade war with China, which has escalated in recent weeks. U.S. officials, including President Trump, had announced that substantial progress had been made, and it seemed that a trade deal was just around the corner. However, Trump shocked the markets by slapping further tariffs on China, which led to counter-tariffs against U.S. products. China has reacted angrily to U.S. trade sanctions on Huawei, a giant Chinese telecom company. The euro has managed to weather the latest crisis in the U.S.-China trade war, but if there is no improvement, investors could opt for the safety of the greenback, which could hurt the British pound.
