The British Pound continues to experience relatively wide daily trading ranges. As recently as Tuesday morning, GBP/USD was below 1.4000 before then jumping almost 2 cents. After a half cent drop post-Fed, in early European trading on Thursday it added nearly another cent to a high of 1.4265; its best level since the day of the ECB meeting last week.
There has been little or nothing on the UK data calendar which is obviously GBP-positive. The manufacturing PMI survey saw a further easing in the rate of expansion of the sector. At 55.3 in January, the index was down further from November’s 51-month high and at its lowest level since June last year. The Press Release noted, “The UK manufacturing sector reported an unwelcome combination of slower growth and rising prices at the start of 2018. Encouragingly, despite the slowdown, the latest survey is consistent with production rising at a solid quarterly rate of around 0.6% in January, with jobs also being added at a faster pace. However, output growth has slowed sharply since last November’s high, and the more forward-looking new orders index has slipped to a seven-month low. The trend in demand will need to strengthen in the near-term to prevent further growth momentum being lost in the coming months”.
As for politics, the Prime Minister spoke with UK journalists on her trip to China and said that EU citizens who arrive during the post-Brexit transition period must not have the same rights as those who came before. We wrote in our North American commentary on Thursday that, “It sounds like another row with the EU is brewing…” Sure enough, within a few hours, the European Parliament’s Brexit negotiator, Guy Verhofstadt, replied that, “The maintenance of EU citizens’ rights during the transition is not negotiable… We will not accept that there are two sets of rights for EU citizens. For the transition to work, it must mean a continuation of the existing acquis [EU law] with no exceptions.” The row looks more likely to escalate than to go away though for the moment hasn’t noticeably dampened enthusiasm for the GBP. The Pound opens in Asia this morning at USD1.4260, GBP/AUD1.7745 and GBP/NZD1.9290.