The British pound has ticked higher in the Tuesday session. In North American trade, GBP/USD is trading at 1.3121, up 0.04% on the day. On the release front, British CPI remained unchanged at 3.0%, just below the estimate of 3.1%. Other inflation indicators were also within expectations. In the US, inflation indicators were stronger than expected. PPI gained 0.4%, above the estimate of 0.1%, while Core PPI also came in at 0.4%, beating the forecast of 0.2%. There are a host of key events on Wednesday. The UK releases wage growth and Claimant Count Change, while the US will publish CPI and retail sales numbers.
The pound is under pressure this week, as the currency dipped below the 1.31 line on Monday and Tuesday. Investors are nervous as Prime Minister May’s leadership is showing large cracks. Two ministers have been forced to resign from May’s cabinet in recent weeks, and Foreign Secretary Boris Johnson has been heavily criticized for comments about a British citizen who is on trial in Iran. May appears to have lost control over her cabinet, with senior ministers openly attacking each other and questioning government policy. On Monday, British media reports said that 40 MPs have signed a letter of no confidence in May’s leadership – a worrisome sign that her days at 10 Downing Street could be numbered.
The Brexit talks remain deadlocked, with large gaps between the sides, such as the size of Britain’s divorce bill. Theresa May’s woes at home haven’t helped matters. Her cabinet remains divided on Brexit policy, with senior ministers quarreling in the open. May hasn’t been able present a coherent Brexit policy to the Europeans or to the voters at home, raising doubts as to whether May can deliver the goods on Brexit. On Monday, Brexit Secretary David Davis said he would introduce legislation that would allow MPs to vote on the final Brexit deal, but lawmakers would not be able to amend the legislation. The UK is scheduled to leave the European Union in March 2019.
