The British pound has posted losses in the Wednesday session. In North American trade, GBP/USD is trading at 1.4220, down 0.48% on the day. On the release front, the UK released a host of inflation indicators, led by the consumer price index. CPI for March dipped to 2.5%, falling short of the estimate of 2.7%. There are no major US indicators on the schedule. On Thursday, the UK releases retail sales. The US will publish unemployment claims and the Philly Fed Manufacturing Index.
Inflation continues to weaken in the UK. The April consumer price index dropped to 2.5%, after six consecutive readings of around 3.0 percent. The soft reading surprised the markets, and the pound responded with losses. The real producer index and other inflation indicators also missed their estimates. However, the markets still expect the Bank of England to raise rates at next month’s policy meeting. Policymakers in favor of a rate hike can point to the fact that inflation still remains well above the BoE target of 2 percent and the labor market remains tight. The pound has jumped more than 5% against the greenback this year, and if the BoE raises rates next month, the pound will likely make further gains.
The recent trade battle between the US and China has been overshadowed by events in Syria, but the threat of further tariffs between the world’s largest two economies could again roil the markets and in turn, send gold prices higher. Another salvo was fired on Tuesday, as China slapped a tariff of some 179% on US sorghum crops, which is a livestock feed. China imports about $1 billion of sorghum annually, and the tariff, if it remains in place, will essentially halt US exports of sorghum to China. The Chinese government has threatened to impose tariffs on US soybean exports, valued at some $12 billion each year. If the US opts to retaliate, the specter of an ugly trade war between the US and China could spook investors and boost the US dollar against the British pound and other rivals.
