GBP/USD has surged in the Thursday session. In the North American session, the pair is trading at 1.2959, up 1.52% on the day. On the release front, the Bank of England held steady and kept the benchmark rate pegged at 0.75%. The BoE also released its inflation report. In the U.S, unemployment claims ticked lower to 214 thousand, a shade above the forecast of 213 thousand. On the manufacturing front, British Manufacturing PMI slipped to 51.1, missing the estimate of 53.0 points. ISM Manufacturing PMI also disappointed, as it fell to 57.7 points, shy of the estimate of 59.0 points. This marked a 6-month low. On Friday, the UK releases construction PMI, while in the U.S the focus will be on U.S employment numbers, with the release of wage growth and nonfarm payrolls.
The pound has jumped on Thursday, after reports that the UK and the EU had reached a milestone agreement, with the EU allowing access to Europe for British financial services companies after Brexit. However, officials in both London and Brussels denied that any deal had been reached. The fact that the pound screamed higher after the report underscores the tremendous tension over the lack of progress between the sides, with less than five months until Britain leaves the EU. Cross-border trade in financial services after Brexit is a key issue, with London eager to maintain its position as the financial capital of Europe. Thus the report that a deal had been reached would represent a significant breakthrough in the Brexit negotiations. The parties remain far apart on a range of issues, notably the Irish border. There is even disagreement on whether the sides are close to inking a Brexit deal. Prime Minister May recently told Parliament that a deal was “95% done”, while EU leaders are far more pessimistic and have expressed surprise at the optimism on the British side.
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