As recently as Tuesday morning, GBP/USD was below 1.4000 before then jumping almost 2 cents. After a half cent drop post-Fed, on Thursday it added nearly another cent to a high of 1.4275; its best level since the day of the ECB meeting last week. The overnight session in Asia has been notable only for the relative calm – GBP/USD, EUR/USD and therefore GBP/EUR are all exactly where they were at 9pm yesterday evening.
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”.
On the politics of Brexit, plenty of seemingly irreconcilable differences seem to be emerging. Yesterday the Prime Minister said that that EU citizens who arrive during the post-Brexit transition period must not have the same rights as those who came before. 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.” Overnight, international trade secretary said Britain must “take control” by seeking trade deals across the world which are impossible within EU arrangements. “It’s very difficult to see how being in a customs union is compatible with having an independent trade policy because we would therefore be dependent on what the EU negotiated in terms of its trading policies and we’d be following behind that”. The weekend Press is unlikely to be kind to the government, but for the moment the GBP seems completely unfazed. The Pound opens this morning at USD1.4265, GBP/AUD1.7805 and GBP/NZD1.9350.