GBP/USD – British pound slips as Brexit deadlock deepens

The volatility continues for the British pound this week. GBP/USD has posted considerable losses on Tuesday, erasing the gains seen on Monday. In North American trade, the pair is trading at 1.3039, down 0.48% on the day. On the release front, British Construction PMI came in at 49.7 points. This was the second straight month that the indicator has been in contraction territory. Data out of the U.S. also disappointed. Durable Goods Orders plunged 1.6%, worse than the estimate of -1.1%. Core Durable Goods Orders posted a weak gain of 0.1%, shy of the estimate of 0.3%. On Wednesday, the U.S. releases ISM Non-Manufacturing PMI and ADP nonfarm payrolls.

The Brexit saga continues, as parliament continues to say ‘no’ to alternatives to Brexit. On Tuesday, lawmakers rejected four indicative votes. With Britain unable to get its act together, there are growing fears that the country will crash out of the European Union without a deal. Such a scenario could hurt economic growth and send the pound reeling. There is also a possibility that the Brexit deadline, which is on April 12, could again be extended. The chaos surrounding Brexit has been bad for business, but actually boosted the February manufacturing PMI, which jumped to 55.2 points. The strong reading reflected significant activity on the manufacturing front, as manufacturers are stockpiling raw materials and finished goods in case that a hard Brexit scenario materializes.

Is the U.S. economy in trouble? The weak durable goods orders data comes on the heels of weak retail sales numbers for March. Retail sales declined by 0.2%, shy of the estimate of +0.3%. Core retail sales declined by 0.4%, a sharp drop from the 0.9% gain a month earlier. Both indicators posted a second decline in three months, which is bound to raise concerns about the strength of the economy. Growth for the first quarter could be as low as 0.8% annualized, compared to 2.2% in the fourth quarter.

It’s all about China

GBP/USD Fundamentals

Tuesday (April 2)

• 4:30 British Construction PMI. Estimate 49.8. Actual 49.7
• 8:30 US Core Durable Goods Orders. Estimate 0.3%. Actual 0.1%
  
• 8:30 US Durable Goods Orders. Estimate -1.1%. Actual -1.6%
  
• All Day – U.S. Total Vehicles Sales. Estimate 16.7M
• 19:01 British BRC Shop Price Index

Wednesday (April 3)

• 4:30 British Services PMI. Estimate 51.0
• 8:15 US ADP Nonfarm Employment Change. Estimate 184K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 58.1

*All release times are DST

*Key events are in bold

GBP/USD for Tuesday, April 2, 2019

GBP/USD April 2 at 11:40 DST

Open: 1.3101 High: 1.3114 Low: 1.3013 Close: 1.3039

GBP/USD Technical

GBP/USD edged lower in the Asian session and posted further losses in European trade. The pair is steady in North American trade

• 1.2910 is providing support
• 1.3070 is the next resistance line. It is a weak line
• Current range: 1.2910 to 1.3070

Further levels in both directions:

• Below: 1.3070, 1.2910 and 1.2841
• Above: 1.3170, 1.3258, 1.3362 and 1.3460

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