HomeContributorsFundamental AnalysisPound Steady After Ending Week on Losses

Pound Steady After Ending Week on Losses

GBP/USD is showing limited movement in the Monday session. In North American trade, the pair is trading just under the 1.29 line. On the release front, there are no major events on the schedule.

The British economy has managed quite well since the Brexit vote in June 2016, but last week’s PMIs may signal the much-feared economic downturn. PMIs in the manufacturing, construction and services sectors all pointed to slower growth in June, compared to the May readings. The double whammy of the British election and the start of Brexit talks with Europe have increased uncertainty and resulted in a decrease in new orders across the economy. The BoE is divided over whether to raise interest rates in the next few months, and the public disagreements between BoE policy makers over rate policy will not help investor confidence. The May government has a razor-thin majority, and must negotiate a divorce with an angry European Union that does not want to see other members opt to leave the club. The UK will release key employment numbers on Wednesday, with wage growth and unemployment claims expected to worsen in June.

The US wrapped up last week with key employment numbers, and the data was mixed. Nonfarm Payrolls rebounded in June, climbing to 222 thousand. This easily beat the estimate of 175 thousand and marked a 4-month high. However, wage growth remains soft, as Average Hourly Earnings was unchanged at 0.2%, shy of the forecast of 0.3%. Weak wage growth has remained soft throughout the first half of 2017, despite a tight labor market. With wages remaining stagnant, inflation is also mired at low levels. If inflation does not improve, the Federal Reserve may have second thoughts about a rate hike in December. Currently, the odds of an increase in December have dipped to 47%, as the markets clearly have their doubts that the Fed will press the rate trigger.

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