GBP/USD: Pound Weakens As Construction PMI Softens

 | Apr 04, 2017 09:25AM ET

GBP/USD has posted losses in the Tuesday session. In the North American trade, GBP/USD is trading at 1.2430. On the release front, British Construction PMI dipped to 52.2, missing the estimate of 52.5 points. In the US, the trade deficit narrowed to $43.6 billion, better than the forecast of $46.0 billion. On Wednesday, all eyes will be on the Federal Reserve, which will publish the minutes of its March policy meeting. As well, the US will release ADP Employment Change and ISM Non-Manufacturing PMI. The UK will release Services PMI.

Britain has entered a new phase in 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 are likely to be difficult. 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, which could run as high as EUR 60 billion. The British government will be under pressure 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, which could create volatility for the struggling pound.

GBP/USD Fundamentals

Tuesday (April 4)

  • 4:30 UK Construction PMI. Estimate 52.5. Actual 52.2
  • 5:38 British 10-y Bond Auction. Estimate 1.13%
  • 8:30 US Trade Balance. Estimate -46.0B. Actual -43.6B
  • 10:00 US Factory Orders. Estimate 1.0%
  • 10:00 US IBD/TIPP Economic Optimism. Estimate 53.2
  • 16:30 US FOMC Member Daniel Tarullo Speech

Upcoming Key Events

Wednesday (April 5)

  • 4:30 UK Services PMI. Estimate 53.5
  • 8:15 US ADP Nonfarm Employment Change. Estimate 191K
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 57.1
  • 14:00 US FOMC Meeting Minutes

*All release times are GMT

*Key events are in bold

GBP/USD for Tuesday, April 4, 2017