GBP/USD – British pound under pressure as May scrambles to save Brexit deal

GBP/USD is lower in the Tuesday session, after sharp losses on Monday. In North American trade, the pair is trading at 1.2529, down 0.30% on the day. On the release front, British employment numbers were mixed. Wage growth climbed to 3.3%, above the estimate of 3.0%. This marked the strongest monthly gain since July 2010. However, unemployment claims rose to 21.9 thousand, much higher than the estimate of 13.2 thousand. In the U.S., PPI came in at 0.1%, above the estimate of 0.0%. Core PPI dropped to 0.3%, but beat the estimate of 0.1%. On Wednesday, the U.S releases CPI reports.

Chaos and uncertainty are some descriptions of the mood in London on Tuesday. In a dramatic turn of events, the May government has deferred the parliament vote over Brexit until an unknown date. The government pulled the plug after it became clear that it would face a massive defeat, which could have crippled the government, possibly costing Prime Minister her job.

Prime Minister May is meeting with European leaders, in a bid to save the listing Brexit agreement. May wants guarantees from the EU that if the backstop arrangement over the Irish border is implemented, the UK will be able to unilaterally withdraw from the arrangement. If May can get the Europeans to agree, the deal will have a better chance of passing through parliament.

The European Union, for its part, has flatly ruled out renegotiating the withdrawal deal. However, both the EU and the British government want to avoid a no-deal scenario, so perhaps the EU will bend in order to help May pass a deal in parliament. The confusion surrounding Brexit sent the British pound sharply lower on Monday.

Only a few months ago, there was talk that the Federal Reserve could hike rates every quarter in 2019. However, signs of a slowdown in the U.S. economy have drastically changed matters, as the Fed is expected to scale back its “gradual rate hike” policy to just one hike next year. Three rate hikes so far this year have slowed economic growth, as seen by lower GDP readings and a dismal nonfarm payrolls report for November. Still, the Fed is widely expected to raise rates at the policy meeting on December 19, with the CME setting the odds of a hike at 80 percent.

Pound under pressure despite PM May’s road trip

GBP/USD Fundamentals

Tuesday (December 11)

• 4:30 British Average Earnings Index. Estimate 3.0%. Actual 3.3%
• 4:30 British Unemployment Rate. Estimate 4.1%. Actual 4.1%
• 4:30 British Claimant Count Change. Estimate 13.2K. Actual 21.9K
• 8:30 US PPI. Estimate 0.0%. Actual 0.1%
• 8:30 US Core PPI. Estimate 0.1%. Actual 0.3%

Wednesday (December 12)

• 8:30 US CPI. Estimate 0.0%
• 8:30 US Core CPI. Estimate 0.2%

*All release times are EST

*Key events are in bold

GBP/USD for Tuesday, December 11, 2018

GBP/USD December 11 at 13:00 EST

Open: 1.2561 High: 1.2639 Low: 1.2492 Close: 1.2529

GBP/USD Technical

GBP/USD ticked lower in the Asian session. The pair recorded small losses in European trade and is down sharply in North American trade

• 1.2488 is providing support
• 1.2589 is the next resistance line
• Current range: 1.2488 to 1.2589

Further levels in both directions:

• Below: 1.2488, 1.2365 and 1.2229
• Above: 1.2589, 1.2706, 1.2812 and 1.2915

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