The British pound is under pressure, as GBP/USD has headed lower for a third straight day. In Thursday’s North American session, the pair is trading at 1.3093, down 0.16% on the day. On the release front, U.S Final GDP in the first quarter slipped to 2.0%, missing the estimate of 2.2%. Unemployment claims jumped to 227 thousand, well above the estimate of 220 thousand. Later in the day, the U.K will release GfK consumer confidence, which is expected to remain unchanged at -7 points. On Friday, there are a host of key events on both sides of the pond. The U.K releases current account and Final GDP and the U.S will publish consumer spending and inflation data, as well as UoM Consumer Sentiment.
In the U.S, Final GDP dipped to 2.0%, weaker than the second estimate of GDP in May, which showed growth of 2.0%. Much of the slowdown is being attributed to weaker consumer spending in the first quarter. There are expectations of banner growth in the second quarter, with some analysts predicting growth of over 5 percent, as the massive January tax cut should boost economic growth. However, the escalating trade war between the U.S and its trading partners, especially China, could dampen second quarter GDP. Trade tensions show no sign of easing, with President Trump threatening tariffs on some $250 billion in Chinese goods. On Thursday, U.S durable goods reports in May were a disappointment. Core durable goods orders declined 0.3%, well of the estimate of 0.5% and a 4-month low. Durable goods orders declined for a second straight month, with a reading of -0.6%. Still, this was better than the forecast of -0.9%.
European leaders are meeting for a crucial 2-day summit on Thursday, and one of the top items on the agenda will be Brexit. The sides remain far apart on a number of issues, with Britain scheduled to leave the club in March 2019. The EU had said that it wanted issues such as the Irish border to be resolved by the June summit, but this won’t happen, and the EU will now have to set another deadline, with time running out. There have been various suggestions for a type of customs union arrangement between Ireland and Northern Ireland, but the May government is split on the issue. European leaders are exasperated with the lack of progress in the Brexit talks and could issue a tough statement that the EU could split from Britain without an agreement in place.