The British pound continues to have an uneventful week. In Wednesday’s North American session, the pair is trading at 1.2914, down 0.04% on the day. On the release front, British Net Lending to Individuals slowed to GBP 4.8 billion, missing the estimate of GBP 5.3 billion. This marked a 3-month low. In the US, Preliminary GDP impressed with a sharp gain of 3.0%, beating the estimate of 2.7%. There was more positive news from the employment front, as ADP Nonfarm Payrolls jumped to 237 thousand, crushing the forecast of 185 thousand. Later in the day, Japan releases Preliminary Industrial Production, with the markets braced for a decline of 0.4%. On Thursday, there are a host of key events in the US, led by unemployment claims.
The US economy scored well on its GDP report card on Wednesday. Preliminary GDP (second estimate) for the second quarter was revised to 3.0%, a marked improvement from the first estimate of 2.6%. Consumer confidence and spending remain strong and helped contribute to the strong GDP report, as the economy posted its strongest gain since the first quarter of 2015. However, solid consumer spending has failed to boost inflation, which continues to hover at low levels. The lack of inflation could hamper the Federal Reserve’s plans to raise interest rates, with the likelihood of a rate hike in December standing at just 35%. On the employment front, ADP Nonfarm Payrolls jumped to 237 thousand, marking a 3-month high. The official Nonfarm Payrolls report will be released on Friday, and if this indicator also beats the forecast, it would be a strong signal that the economic momentum has continued into the third quarter.
Have the Brexit negotiations hit a brick wall? Talks have resumed in Brussels, as the two sides are meeting for a third round of talks this week. There are large gaps between the sides, and even the range of topics to be discussed at the onset is in dispute. Britain wants to discuss a future trading relationship with the EU at the same time that points in contention are dealt with, but the Europeans insist on solving the contentious issues first, such as the size of Britain’s bill and the jurisdiction of the European High Court on European citizens living in the UK. With plenty of distrust between the sides, the negotiations could grind to a halt if both sides don’t show greater flexibility.
