The British pound has posted gains in the Wednesday session. In North American trade, GBP/USD is trading at 1.3283, up 0.35% on the day. On the release front, the UK presented the Autumn Budget. In the US, durable goods reports were a mix. Core Durable Goods Orders gained 0.4%, matching the forecast. However, Durable Goods Orders declined 1.4%, well of the forecast of a 0.4% gain. The UoM Consumer Sentiment report came in at 98.5, above the forecast of 98.2 points. Later in the day, the Federal Reserve releases the minutes of its November policy meeting.
British Finance Minister Philip Hammond released the August Budget, which was noteworthy for a large contingency fund for Brexit. Hammond announced he was setting aside GBP 3 billion pounds over the next two years, beefing up the contingency fund of GBP 700 million. Meanwhile, the Office for Budget Responsibility (OBR) downgraded Britain’s GDP for 2017, from 2% to 1.5%. The OBR also revised downwards productivity growth and business investment, further signs that the economy could be headed for a down-spin.
There was positive news from British CBI Industrial Order Expectations on Monday, an important barometer of activity in the manufacturing sector. The indicator surged to 17 points in October, rebounding from the September release of -2 points. Manufacturing indicators continue to point upwards, boosted by strong global demand and a weak British pound. Export order books are at their highest levels since 1995, and the markets are predicting that the export and manufacturing sectors will continue to shine in the fourth quarter.
The markets are keeping an eye on the Federal Reserve, which will release the November minutes later in the day. In October, the Fed announced that it would taper its balance sheet, and those reductions of $10 billion commenced around the time of the November meeting. The odds of upcoming rate hikes remains very high, with fed futures priced in at 91% and 89%, respectively. If the minutes reinforce the market perception that more markets are just around the corner, the US dollar could gain ground.
