The British pound continues to have a quiet week and is showing little movement in the Wednesday session. In North American trade, GBP/USD is trading at 1.3394, up 0.15% since the Friday close. On the release front, there are no British events on the schedule.
In the U.S, the first key indicators of the week were mixed. CB Consumer Confidence slowed to 122.2, well off the estimate of 128.2 points. Pending Home Sales posted a small gain of 0.2%, beating the estimate of -0.4%. Housing numbers continue to beat expectations. Last week, Housing Starts came in at 1.30 million, beating the forecast of 1.25 million. On Tuesday, New Home Sales sparkled, with a gain of 733 thousand. This easily beat the estimate of 654 thousand, and was the highest reading since September 2007. On Thursday, the US releases unemployment claims, which is expected to drop to 241 thousand.
The Brexit negotiations are finally shifting to trade, much to the relief of an embattled Prime Minister May, who has faced harsh criticism over her handling of the talks with the Europeans. Still, May has her work cut out for her, with little more than a year until Britain leaves the European Union. Her cabinet remains split on what a Brexit deal will look like, and the Europeans are in no mood to do Britain any favors, in order not to give other EU members any ideas about jumping ship. What will a trade relationship between Britain and the European Union look like? That remains unclear, but it’s no secret that the two sides have very different views of a future trade agreement. There was a taste of this last week regarding financial services. The EU senior negotiator, Michel Barnier, said Britain’s financial services would not be included in a Brexit deal, as no free trade agreements have included financial services. BoE Governor Mark Carney took issue with Barnier, arguing that there was no reason why the UK and the EU couldn’t maintain some type of free trade in financial services. Clearly, the sides remain far apart on the “end phase” of what a Brexit agreement will look like, and both Britain and the EU will have to show some flexibility in order to hammer out an agreement. Given the lack of trust between the sides, the talks will likely hit plenty of snags, and this could weigh on the British pound in the coming months.
