GBP/USD has posted losses in the Friday session. In North American trade, the pair is trading at 1.2832 down 0.34% on the day. It’s a quiet end to the week, with no British events. The U.S will release manufacturing and services PMIs, both minor events.
With the Brexit clock ticking down towards the March deadline, we can expect more volatility from the British pound. The drama continues on Sunday, as Prime Minister May and EU leaders are scheduled to sign a withdrawal agreement in Brussels at a special Brexit summit. Still, uncertainty abounds, as the post-Brexit relationship between the parties remains unclear. Some EU members feel that Britain is getting too sweet a deal, and Spain has warned it could veto the deal unless it has more of a say over any agreement concerning Gibraltar. A solution to the Irish border issue has proved elusive, although everyone seems to agree that a hard border between Ireland and Northern Ireland is not an option.
Back home, Prime Minister May will have an uphill battle pushing the deal through parliament, with the Labor party and many Conservative MPs set to vote against the deal. May has argued that the withdrawal agreement is better than a no-deal scenario, but both sides remain ready for this worst-case possibility. On Friday, German finance minister Olaf Scholz warned that a no-deal Brexit would cause significant economic harm to both sides, adding that Germany was prepared for such an outcome.
Is the U.S. economy headed for a slowdown? The markets have grown accustomed to strong economic numbers from the U.S, but quarterly GDP releases have been softening, and there has even been talk of a recession. This has led to speculation that the Federal Reserve could ease up on its interest rate hikes next year. Only a few weeks ago, there were expectations that the Fed could raise rates each quarter in 2019, but the mood has become more cautious. The U.S.-China trade war has caused a slowdown both economies, and President Trump’s $1.5 trillion tax cut has boosted the economy, but its effect on the economy is fading. A rollback in U.S rate hikes would make the greenback less attractive to investors, which would be bullish for other currencies such as the British pound.
