The British pound continues to have a quiet week and is showing little movement in the Thursday session. In North American trade, GBP/USD is trading at 1.3444, up 0.34% on the day. Earlier in the day, the pair climbed to its highest level since December 14. On the release front, the sole British event was High Street Lending ,which slipped below the 40-thousand threshold for the first time since September 2016. The indicator dipped to 39.5 thousand in November, shy of the estimate of 40.6 thousand. In the US, unemployment claims disappointed, remaining unchanged at 245 thousand. This was higher than the estimate of 240 thousand.
In the U.S, the first key indicators of the holiday 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.
With no major British indicators during Christmas week, the pound has shown limited movement. That could change next week, with the release of PMI reports, which are highly-respected barometers of the services, manufacturing and construction sectors. The PMIs have been pointing to expansion in all three industries, with notably strong growth in manufacturing, which has received a boost for strong global demand for British exports. As well, the weak pound has also made British products less expensive.
High on Prime Minister Theresa May’s New Years’ agenda is Brexit. The talks are finally shifting to trade, much to the relief of May, who has faced harsh criticism at home over her handling of the talks with the Europeans. 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 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 parties, there will be more bumps on the Brexit road, which could weigh on the British pound in the coming months.
