US tax uncertainty hammers dollar
The British pound/U.S. dollar (GBP/USD) currency pair gained 1.03 % this week. The currency pair is trading at 1.3211 and gained 0.39 on Friday alone after the UK manufacturing production and goods trade balance releases. The ONS published a 0.7 % gain in monthly manufacturing gain beating expectations of a 0.3 % rise. The balance of imported versus imported goods in the UK shrank for the first time in 5 months. The weakness in the pound has helped boost the manufacturing numbers as exports also become more competitive.
Softer Brexit hopes rose on Friday as EU chief Brexit negotiator Michel Barnier issued comments on the possibility of trade talks still happening in December. The divorce between the EU and the United Kingdom is slowly inching forward, but with little progress on an amicable split. Adding drama to the proceedings the author of Article 50 Lord Kerr, a former UK ambassador to the European Union suggests that there is still a chance to withdraw the bill. With Theresa May’s hold on the conservative party weakening these comments will not help her cause. Although she supported to Remain in the EU, the fact that she was victorious in a Prime Minister race in the aftermath of the referendum.
The Bank of England (BoE) hiked rates by 25 basis points to 0.50 % on November 2 under pressure from inflation who sits at 3 %, when the target from the central bank is 2 %. The bank remains concerned about the potential fallout when the UK leaves the European Union, but it is limited in what it can actually do to shore up the economy. The release of the UK inflation data next week will be the focus of pound traders as they keep monitoring the ongoing Brexit saga for any potential downside risks.
The price of oil remains above the $56 price level on Friday. West Texas Intermediate surged on Monday after the news of the arrests of influential princes and politicians were made public. As part of a corruption sweep ordered by the Saudi Crown Prince Mohammed bin Salman. The prince has quickly landed on the global scene and has been the driving force behind the biggest initiatives at the Organization of the Petroleum Exporting Countries (OPEC) but also the aggressive diplomatic style putting an embargo against Qatar.
Political uncertainty in one of the world’s largest producers of oil has taken prices higher. The price has been kept in a new range given the ample supply still in existence. US weekly inventories showed a surprise buildup on Wednesday. The price of West Texas has been stable at the new trading range and will be sensitive to additional information on the Kingdom’s future.