The British pound has posted losses in the Thursday session. In North American trade, the pair is trading at 1.2884, down 0.31% on the day. On the release front, there are no British events on the schedule. In the US, unemployment claims edged up to 236 thousand, just below the forecast of 237 thousand. In the US, Personal Spending improved to 0.3%, just shy of the estimate of 0.4%. The news was not as good from the housings sector, as Pending Home Sales posted a sharp decline of 0.8%, well off the forecast of +0.4%. On Friday, the UK releases Manufacturing PMI, with an estimate of 55.1 points. In the US, we’ll get a look at key employment data. Average Hourly Earnings is expected to edge lower to 0.2%, and the markets are braced for Nonfarm Employment Change to drop to 180 thousand.
The US economy look sharp in the second quarter of 2017, as Preliminary GDP (second estimate) for the second quarter was revised to 3.0%. This figure was a marked improvement from the first estimate of 2.6%. Consumer confidence and spending remain strong and helped contribute to second quarter growth, which posted its strongest gain since the first quarter of 2015. However, solid consumer spending has failed to boost inflation, and wage growth remains weak. The markets will be looking closely at the July wage growth report, which is expected to show a weak gain of 0.2%. The lack of inflation could hamper the Federal Reserve’s plans to raise interest rates, with the likelihood of a rate hike in December standing at just 35%. On the employment front, ADP Nonfarm Payrolls jumped to 237 thousand, marking a 3-month high. The official Nonfarm Payrolls report will be released on Friday, and if this indicator also beats the forecast, it would be a strong indication that the economic momentum has continued into the third quarter.
The Brexit negotiations continue to grind slowly, causing concern in both Brussels and London. A third round of talks ended on Thursday in Brussels. Britain and the EU remain far apart on a range of issues and even the scope of the talks remain in dispute. Britain wants to discuss a future trading relationship with the EU at the same time that points in contention are dealt with, but the Europeans insist on solving the contentious issues first, such as the size of Britain’s bill and the jurisdiction of the European High Court on European citizens living in the UK. With plenty of distrust between the sides, the negotiations could grind to a halt if both sides don’t show greater flexibility, and such a scenario would likely take a toll on the British pound.
