HomeContributorsFundamental AnalysisPound Climbs To 1.34 As Manufacturing Orders Surge

Pound Climbs To 1.34 As Manufacturing Orders Surge

The British pound has started the week with gains, after strong losses on Friday. In Monday’s North American trade, GBP/USD is trading at 1.3395, up 0.52% on the day. On the release front, British CBI Industrial Order Expectations remained unchanged at 17, beating the estimate of 14 points. There were no major events in the US. On Tuesday, the key event on the schedule is US Building Permits.

President Donald Trump appears on his way to claiming his first major legislative victory in office. Thanks to feverish efforts by Republican lawmakers, tax reform is quickly moving through Congress, with a final vote expected this week. The House and Senate have hammered out their differences, and the uniform bill, which must be approved in both houses, is expected to muster the necessary votes, even with all Democrats expected to vote against the bill. Crucially, two Republican senators who were opposed to the bill have now lent their support to the bill. The legislation is the first major overhaul of the US tax code in 30 years, and is expected to strengthen the US economy.

As expected, the Bank of England stayed pat and kept the benchmark interest rate at 0.50% late last week. The vote by MPC members was significant in that there were no dissenters, as all 9 policymakers were in agreement for the first time since February. BoE Governor Mark Carney will certainly be pleased with the unanimous vote, but could be on the hot seat as inflation continues to creep higher. CPI climbed to 3.1% in November, edging above the forecast of 3.0%. Inflation is now running at its highest level since March 2012, and Carney will have to write an open letter to open letter to the British finance minister, explaining how the BoE plans to lower inflation closer to the Bank’s target of 2.0%. Carney would rather not raise rates in the next few months, but that could be the most effective tool in bringing down inflation, which is at uncomfortably high levels.

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