The pound rose 0.4% on Friday after three days of declines, trading close to its biggest weekly loss since 2017 after gains last week on the Conservatives’ clear election win were erased by the resurfacing risk of a no-deal Brexit.
The pound did not react on Friday after lawmakers, as widely expected, voted by a large margin to pass Prime Minister Boris Johnson’s European Union exit deal.
His Withdrawal Agreement Bill is a mixed bag for pound traders. It creates some certainty in that it fixes the EU departure date as 31st January, but it revives the risk of a no deal as it bans any extension of a post-Brexit negotiating period scheduled to run to December 2020.
The dollar held firm at the start of a holiday-thinned week on Monday, as US data pointed to solid economic growth while the British pound bounced slightly after having suffered its biggest weekly fall in three years.
A batch of economic data published on Friday showed the US economy, already in its longest expansion in history, appears to have maintained the moderate pace of growth as the year ended, supported by a strong labour market.
Gross domestic product increased at a 2.1% annualized rate, the Commerce Department said in its third estimate of third-quarter GDP. That was unrevised from November’s estimate.
Earlier this year, investors were spooked by fears over the possibility of a US recession when the US yield curve inverted, which has been historically one of the most reliable signs of a US downturn.
Separate data showed consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.4% last month as households stepped up purchases of motor vehicles and spent more on healthcare.
14.45 – USD – Chicago PMI