GBP/USD -British pound trading sideways, political drama continues

The British pound is showing limited movement in the Wednesday session. In North American trade, the pair is trading at 1.3245, down 0.22% on the day. In economic news, there are key British releases. In the U.S, inflation reports narrowly beat their estimates. Core PPI was unchanged at 0.3%, beating the forecast of 0.2%. PPI dropped from 0.5% to 0.3%, above the estimate of 0.2%. On Thursday, the UK releases the BoE Credit Conditions Survey and the U.S publishes CPI and Final CPI as well as unemployment claims.

Prime Minister Theresa May is in a precarious position, as her government is in crisis following the stunning resignation of foreign secretary Boris Johnson on Monday. This comes on the heels of the resignation of Brexit Secretary David Davis on Sunday. Both senior ministers were protesting the “Chequers Agreement” in which the cabinet backed May’s stance in which the UK would maintain current customs arrangements for manufacturing and agricultural products after Brexit. Brexit hardliners such as Davis and Johnson have argued that such an arrangement would force Britain to harmonize much of its economy based on the dictates of Brussels. There is growing speculation that May will be replaced, and if the political crisis in Whitehall worsens, the pound could face some significant headwinds.

The markets continue to cast a wary eye at the worsening global trade war, particularly between the United States and China. After the two economic giants imposed tariffs on each other of some $30 billion, the Trump administration has raised the ante, threatening to hit China with further tariffs on $200 billion worth of Chinese goods. China cannot retaliate in kind, since it does not import that amount of goods from the U.S. Still, the Chinese can take steps which will make it more difficult for U.S companies to do business in China. President Trump’s presence at the NATO summit will not bolster investor confidence, as Trump has lashed out at Germany and other NATO members for not paying their fair share in defense spending.

  Investors turn risk-averse on tariff war escalation

  ( Update 1) When the going gets tough, the tough get going

GBP/USD Fundamentals

Wednesday (July 11)

• 8:30 US Core PPI. Estimate 0.2%. Actual 0.3%
• 8:30 US PPI. Estimate 0.2%. Actual 0.3%
• 10:00 US Final Wholesale Inventories. Estimate 0.5%. Actual 0.6%
• 10:30 US Crude Oil Inventories. Estimate -4.1M. Actual -12.6M
• 11:35 BoE Governor Mark Carney Speaks
• 12:30 US FOMC Member Rafael Bostic Speaks
• 13:01 US 10-year Bond Auction
• 16:30 US FOMC Member John Williams Speaks
• 19:01 British RICS House Price Balance. Estimate -3%

Thursday (July 12)

• 4:30 BoE Credit Conditions Survey
• 8:30 US CPI. Estimate 0.2%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 226K

*All release times are DST

*Key events are in bold

GBP/USD for Wednesday, July 11, 2018

GBP/USD July 11 at 11:10 DST

Open: 1.3274 High: 1.3286 Low: 1.3234 Close: 1.3245

GBP/USD Technical

GBP/USD ticked lower in the Asian session. In European trade, the pair edged higher but then reversed directions and moved lower. In North American trade, GBP/USD posted small gains but has retracted

• 1.3186 is providing support
• 1.3263 has switched to a resistance role after losses by GBP/USD on Wednesday
• Current range: 1.3186 to 1.3263

Further levels in both directions:

• Below: 1.3186, 1.3088 and 1.2996
• Above: 1.3263, 1.3494, 1.3613 and 1.3712

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