GBP/USD has steadied in the Wednesday session, after losing close to 1.0% so far this week. In North American trade, the pair is trading at 1.3072, up 0.04% on the day. In the U.K., the BRC Shop Price Index gained 0.4%, its strongest reading since April 2013. Net Lending to Individuals jumped to GBP 4.8 billion, well above the estimate of GBP 4.3 billion. Later in the day, British consumer confidence is expected to post a weak score of -14 points. In the U.S., the highlight is the Federal Reserve rate statement. With the Fed expected to remain on the sidelines, investors will be focusing on the rate statement, which is expected to be dovish in tone. The ADP nonfarm employment change fell to 213 thousand, but managed to beat the forecast of 180 thousand. On Thursday, the U.S. publishes Employment Cost Index and unemployment claims.
After a tumultous session in parliament, the Brexit outlook remains as unclear as ever. Lawmakers voted against a no-deal scenario (although this is not binding) and instructed Prime Minister May to go back to Brussels to renegotiate the Irish backstop provision. However, the EU has insisted it will not reopen the withdrawal deal. On Tuesday, an EU official expressed dismay over the Brexit wrangling, saying that “London has negotiated with itself more than the EU.” The May government has refused to put a no-deal Brexit off the table, in part to keep pressure on the EU to show some flexibility and avoid a no-deal scenario, which would be detrimental to the eurozone as well as the U.K.
The Federal Reserve was aggressive in 2018, raising rates by a quarter-point on four occasions. With a nasty trade war dampening global economic growth, it is clear that the Fed will ease up on monetary policy this year. But, by how much? There are a various answers, depending on who you ask. The markets are not expecting any increases this year, while the Federal Reserve continues to stick with a forecast of two hikes. The Congressional Budget Office has also weighed in, saying that it expects further rate increases this year. Investors will be combing through the rate statement, looking for clues as to the timing of the next rate hike.
