Pound sterling is higher against all major currencies today. The British pound is currently the strongest against the euro and the Japanese yen. Last week, the pound sold off sharply after domestic data (wage growth, inflation and retail sales) were below expectations while Governor Mark Carney signaled patience with regards to a rate hike in May.
Turning to recent news, The Times (paywall) is reporting that Theresa May's team may "surrender over customs union". Previously, May refused to consider the customs union option as it prevents the UK from independently negotiating international trade agreements. According to The Times, a wargaming exercise suggested that pro-Brexit Conservatives including Michael Gove and David Davis are unlikely to resign if May pursues a customs union with the EU. As the UK looks more likely to consider a customs union with the EU (following Brexit), the pound is strengthening in response. While pursuing a customs union is a risky move politically, it would provide stability for UK-based businesses (helping the pound). Our short-term outlook on the pound is now neutral, while our medium-term outlook on the pound remains bullish
GBP/USD is currently above 1.4020. EUR/GBP is down slightly, with the exchange rate above 0.8750. The pound is up against the Australian dollar and up slightly against the Canadian dollar. GBP/AUD is currently above 1.8280, while GBP/CAD is above 1.7880.
Looking at this week’s economic data from the United Kingdom, traders will be watching upcoming Q1 GDP growth figures. Tomorrow, we’ll see public sector borrowing figures for March. On Thursday, we’ll see Nationwide housing price growth for April. On Friday, the most important day, we’ll get Q1 GDP growth. We’ll also see GfK consumer confidence for April. Last week, March inflation figures were below estimates while Governor Mark Carney downplayed the possibility of a rate hike in May.
As the pound runs out of steam, we are now neutral on the currency in the short-term. The pound is now trading within normal conditions. This is based on various technical indicators on a daily chart.
As the pound continues to strengthen, we are now bullish on the currency in the medium-term. The pound is now looking trading within normal conditions. This is based on a range of technical indicators looking at a weekly chart.