GBP/USD is almost unchanged in the Wednesday session. In North American trade, GBP/USD is trading at 1.2950. On the release front, there are no major events in the UK or the US. Thursday will be busy on both sides of the pond. The BoE will set its benchmark rate and release the inflation report, and the UK releases Manufacturing Production. In the US, there are two key releases – PPI and unemployment claims.
The British consumer continues to spend, as underscored by a report that showed retail sales in BRC stores jumped 5.6% in April compared to a year ago. The sharp increase underscores that consumer spending remains resilient, but there are growing concerns that this trend will change in 2017. Analysts point to two major areas of concern. First, the weak British pound means that consumer purchasing power has decreased, since imported goods have become more expensive. Second, the triggering of Article 50 and the upcoming negotiations with the EU over Brexit is causing uncertainty about the economy and jobs, and this means that consumers will be holding back on buying major items. If consumer spending, a key driver of economic growth, weakens, the pound could follow suit and lose ground.
President Donald Trump is no stranger to controversy, but the political earthquake he has now stirred could become political quicksand for the new president. Trump abruptly fired FBI director James Comey on Tuesday, stunning lawmakers on both sides of the aisle. Comey, who has been conducting an investigation into possible collusion between Trump and Russia during the presidential campaign, clearly has been a thorn in Trump’s side. The White House has claimed that it fired Comey over his handling of an email scandal involving Hillary Clinton, but the move has been roundly condemned by the Democrats, and some key Republicans have also voiced opposition as well. The firestorm could heat up further, with calls in Congress to appoint a special prosecutor into Trump’s connections with Russia. Has Trump gone one step to far? This latest controversy could cause some jitters among investors and send the greenback to lower levels.
