The pound has started the week with losses, erasing the gains seen on Friday. Currently, GBP/USD is trading at 1.2671, down 0.33% on the day. On the release front, markets are closed in both the U.S and U.K. for public holidays. On Tuesday, the U.S. releases CB Consumer Confidence. Investors are looking ahead to later in the week, as the U.S. releases first-quarter GDP on Thursday.
Elections to the European Parliament showed a dramatic surge in support for far-right parties across Europe, and the U.K. Brexit party was one of the day’s big winners. The party won 29 seats, compared to 10 for Labour and just 4 for the Conservatives. A chastised Prime Minister May tweeted that it “was a very disappointing night for the Conservatives”. The election results were a resounding backlash against the mainstream parties for their handling of Brexit, which has dragged on past the original deadline, with no solution in sight. For investors, the worst-case scenario is a no-deal exit, which could undermine the economy and send the British pound sharply lower. Unless May can pull a Brexit rabbit out of her hat, it will be up to her replacement, as yet unknown, to try and hammer out a withdrawal deal with Brussels.
U.S. indicators ended the week on a disappointing note, as April durable goods orders were softer than expected. Durable goods orders slumped 2.1%, just below the estimate of -2.0%. This marked the sharpest decline since January 2018. The core reading slowed to 0.0%, down from 0.4% a month earlier. The U.S. economy has been performing well, and the economy will receive a report card on Thursday, with the release of Preliminary GDP for the first quarter, which is expected to post a strong gain of 3.1%. The initial GDP reading showed a gain of 3.2%, crushing the estimate of 2.2%. Will the revised release also beat expectations? If so, traders can expect the U.S. dollar to post broad gains.
