The British pound continues to show little movement this week. In North American trade, GBP/USD is trading at 1.3574, up 0.19% on the day. On the release front, there are no major British indicators. In the US, PPI dropped to 0.1%, shy of the estimate of 0.2%. Core PPI edged lower to 0.2%, matching the forecast. On Thursday, the UK releases Manufacturing Production, and the US will publish consumer inflation reports.
The currency markets are not showing much movement after President Trump’s dramatic speech on Tuesday. Trump announced that the US would withdraw from the Iran nuclear deal. Trump blasted the agreement and said that the US would impose stiff sanctions on Iran. However, Britain, France and Germany have said they plan to remain in the deal, and will be holding a high-level meeting with Iranian leaders on how the agreement can be salvaged. With the US acknowledging that the White House does not have a ‘Plan B’, it’s unclear what happens next. Meanwhile, tensions between Iran on one the one side, and US allies Israel and Saudi Arabia on the other are at a fever pitch, and any military confrontation involving these countries could shake up the markets.
Investors are keeping a close eye on the Bank of England, which will set the benchmark interest rate on Thursday. Just a few weeks ago, there were strong expectations that the bank was poised to raise rates by a quarter-point, but some weak releases have soured sentiment towards a rate hike. For example, Preliminary GDP in the first quarter gained only 0.1%, missing the forecast of 0.3 percent. The cautious BoE is expected to maintain rates at 0.50% on Thursday, as short-term interest rates are now pricing in less than a 10 percent probability of a rate increase. Analysts are circling August as the next likely date for a rate hike.
