The British pound has started the trading week quietly. In North American trade, GBP/USD has ticked higher and is trading at 1.2730. On the release front, British BBA Mortgage Approvals dipped to 40.3 thousand, matching the forecast. In the US, durable goods orders missed expectations, disappointing the markets. Core Durable Goods came in at 0.1%, missing the forecast of 0.4%. Durable Goods Orders declined 1.1%, short of the forecast of -0.5%. On Tuesday, we’ll get a look at CB Consumer Confidence and Fed Chair Janet Yellen will speak at an event in London.
It’s been a rough few weeks for British Prime Minister Theresa May, who suffered a major setback in the recent election, as she lost her majority in parliament. May has had to deal with domestic critics, some who have been blistering in their attacks on her poor performance in the election. With the Brexit talks finally underway, May has to deal with European leaders who are unhappy with Britain ditching their club. There was finally some good news on Monday for the embattled May, who reached an agreement with the DUP, a small Irish party. The DUP will not formally enter the government, but has committed to support the government on its legislative agenda, Brexit and the budget. In return, May will provide Northern Ireland with an additional one billion pounds over the next two years. The deal should provide May with some breathing room in parliament, allowing her to shift gears from damage control and focus on the economy and the Brexit negotiations.
There was positive news last week from the US construction industry. On Friday, New Home Sales jumped to 610 thousand, above the forecast of 599 thousand. Earlier in the week, Existing Home Sales improved to 5.62 million, beating the estimate of 5.54 million. There had been concerns about construction numbers, as Building Permits and Housing Starts both missed expectations in the May releases. Later in the week, the economy receives a report card, with the release of Final GDP for the first quarter. Preliminary GDP, which was released in May, came in at 1.2%, and this is the forecast for Final GDP. Will weak inflation and consumer spending result in a weaker than expected GDP report? If so, the US dollar could be a casualty and lose ground against its rivals.
