GBP/USD has ticked higher in the Tuesday session, following sharp losses at the start of the week. In North American trade, the pair is trading at 1.2984, up 0.15% on the day. On the release front, there are no major British or U.S events. British CBI Industrial Order Expectations remained in negative territory for a third straight month, dropping to -6 points. This was the weakest reading since October 2016. In the U.S, Richmond Manufacturing Index dropped sharply to 15 in October, down from 29 points in September.
Brexit negotiations appear at an impasse, although Prime Minister May put on a brave face on Monday, stating in parliament that 95% of the issues have been resolved, with the status Irish border remaining in dispute. May continues to face difficulties with a restless cabinet, as some ministers are uneasy about her remarks last week that she was open to extending the transition period. Brexiteers are also unhappy that May appears willing to accept the Irish backstop clause without a time limit, which could leave the UK tied to the EU for an interminate period of time. This means that May could face a leadership challenge, and a huge anti-Brexit rally in London on the weekend underscores the volatile political climate in Britain ahead of Brexit Day in just five months time. The uncertainty surrounding Brexit continues to weigh on the pound, which dropped below the symbolic 1.30 line on Monday, for the first time since October 4.
The trade war between the U.S and China continues to simmer, with the markets nervous that that trade tensions could escalate. The U.S Treasury Department released its semi-annual report on foreign exchange rates on Thursday, and there was some relief in the markets as the report did not name China as a currency manipulator. Still, the report said that the U.S was “deeply disappointed’ with that China refuses to disclose the extent of its foreign currency intervention. The Chinese yuan has slipped some 9 percent since April, and U.S officials are concerned that China has deliberately weakened the currency in order to counter U.S tariffs on Chinese goods, and will continue to monitor China’s currency practices.
