The British pound has posted slight gains in the Thursday session. In North American trade, GBP/USD is trading at 1.3432, up 0.15% on the day. On the release front, British Halifax HPI recorded a strong gain of 1.5%, beating the estimate of 1.1%. In the U.S, unemployment claims ticked up to 222 thousand, just below the estimate of 223 thousand. On Friday, the U.K releases Consumer Inflation Expectations.
Talks between Britain and the European Union are largely stalled, even though time is of the essence, as Brexit is only nine months away. Prime Minister May continues to be hampered by serious divisions in her government concerning Brexit, making negotiations with the Europeans all the more difficult. One of the thorniest issues is the Irish border. Currently, there is no hard border between Northern Ireland and Ireland, but some mechanism will have to be put into place once Britain leaves the European Union. Many ideas have been floated about, and on Thursday, the May government proposed a ‘backstop’ (last resort) plan. This means that Britain would be part of the EU customs union up to December 2021, unless the parties reached an alternative arrangement prior to this date. May is calling this proposal a “temporary customs union”, and it remains to be seen if the EU will accept the backstop solution.
The annual G-7 summit is often a chance for leaders are often a chance to catch up with friends and hold a photo-op, but this year’s summit could be explosive, with plenty of bad will between six of the members and President Trump. The reason? The renewal of the tariff spat, courtesy of the U.S slapping aluminum and steel tariffs on the European Union and Canada. Last week, finance ministers from six members of the G-7 were united in their criticism of US Treasury Secretary Steve Mnuchin over the brewing trade war. Will we see a higher profile, repeat performance at this meeting? Canada and Mexico have already announced retaliatory duties on U.S products. The escalating trade battle is sure to dominate the summit, and if the leaders fail to resolve matters, a trade war could hurt the British economy.
