After weakening sharply in the first week of October, the pound is rebounding this morning against most major currencies including the dollar and the euro. Looking at news over the weekend, senior Conservative Party figures have publicly given their support to Theresa May. This has helped subdue concerns that a power struggle within the party may result in May's ouster and derail Brexit negotiations. Earlier, we warned that the pound was looking oversold. The currency remains oversold, particularly against the dollar, and may continue strengthening from here in the short-term.
GBP/USD is currently trading above 1.31, having made its most recent bottom above 1.30. EUR/GBP is now falling after rising for most of last week. EUR/GBP is currently trading below 0.8950. The pound has strengthened against the Australian dollar and the Canadian dollar this morning, with GBP/AUD around 1.6880 and GBP/CAD around 1.6440.
After various survey data points last week, this week will include a fair amount of macroeconomic data for the UK. On Monday, we’ll see year-over-year retail sales, which have been fairly volatile this year. Tuesday is a big day and includes manufacturing and industrial production figures, trade balance data and an estimate for GDP growth in the trailing three months. Finally on Wednesday, we’ll get house price data. Last week's survey data suggested good services growth, while construction and manufacturing PMIs came in below expectations.