The British pound is trading sideways in the Tuesday session. In North American trade, GBP/USD is trading at 1.3975, down 0.14% on the day. In economic news, the British public sector deficit dropped sharply to GBP 1.0 billion, beating the estimate GBP 4.2 billion. In the US, the Richmond Manufacturing Index, slowed to 14, well off the forecast of 19 points. On Wednesday, the UK release key employment numbers, led by Claimant Change. The US will publish Existing Home Sales.
Despite plenty of hand wringing over Brexit, the British economy has been performing fairly well. Key employment numbers will be released on Wednesday, and the markets are expecting solid readings for unemployment rolls and wage growth. If these predictions prove accurate, investors could give a thumbs-up and push the pound higher. The markets are keeping a close eye on Preliminary GDP for Q4, which will be released on Friday. Earlier on Tuesday, the pound hit the symbolic 1.40 level for the first time since June 2016. The currency has impressed in January, jumping 3.6% against the dollar.
The US government shutdown turned out to be little more than a nuisance, with only one working day lost. On Monday, the Senate voted 266-150 to extend government funding until February 8. This stopgap measure will enable the government to provide services during that time, but the lawmakers will need to hammer out a longer-term agreement, as these short extensions are just band aid solutions. The Democrats held up a funding bill last week, in order to force the Republicans to the table over illegal immigration. The Republicans have promised to hold a vote on this issue, but many Democratic lawmakers remain skeptical that President Trump and the Republicans will deal in good faith over immigration.
