GBP/USD has posted slight losses in the Monday session. In the North American trade, GBP/USD is trading at the 1.25 level. On the release front, British Manufacturing PMI improved to 54.2, but this fell short of the forecast of 55.1 points. In the US, ISM Manufacturing PMI dropped to 57.2, matching the forecast. On Tuesday, the UK releases Construction PMI.
Britain has entered Phase II of the Brexit saga, as Prime Minister Theresa May gave formal notice its intent to leave the EU last week. The negotiations over the breakup are supposed to be conducted over a two-year period, and promise to be tough and perhaps acrimonious. The EU has no intention of giving Britain a better deal than it had within the club, and wants the first item of business to be "exit bill" for Britain’s share of debts, pensions and other payments. The EU says the amount in demand could be as high as EUR 60 billion, but the UK government is likely to balk at the bill. For its part, the British government needs to show the British public that it has reached a good deal,and has threatened to leave the EU without a deal if the EU is intransigent in the negotiations. That scenario, labeled "hard Brexit", would likely take a toll on the British economy and could send the pound downward. Negotiations are unlikely to commence for several months, but we’re likely to have plenty of tough talk between the parties in the meantime.
Donald Trump’s young presidency has been turbulent. The battles with the media continue, an economic policy remains a mystery, and Trump suffered a major setback as he couldn’t even muster a vote over his healthcare bill. Despite these hiccups, the US economy hasn’t missed a beat in 2017. The CB consumer confidence report soared to 125.6 in March, and strong consumer confidence levels should translate into increased consumer spending. GDP for the fourth quarter was revised to 2.1%, up from 1.9% in the previous GDP report. This points to strong growth for the economy, as the discussions around the monetary policy tables are not whether the Fed will raise rates, but will it press the rate trigger twice or three times in 2017. The Fed will release the minutes of its March meeting on Wednesday, and the markets will be looking for clues as to the timing of a possible rate hike.
