The pound is slightly weaker this morning after falling yesterday. At one point yesterday, the pound rose to 8-week highs ahead of a key EU summit. GBP/USD briefly touched $1.3383. Concerns regarding a border with Ireland helped the currency retreat. The border issue is worsening the outlook for a Brexit deal as the Irish government is at risk of collapsing. According to Reuters, the EU gave Theresa May a 10-day deadline to improve her Brexit bill and Irish border offer earlier this month. If she fails to produce an acceptable offer, EU leaders are unlikely to progress to trade talks at the upcoming EU summit in December. Our outlook on the pound remains bullish ahead of the event, with the caveat that the pound is susceptible to political headlines.
GBP/USD is currently just above 1.330. EUR/GBP is up today and the pair is currently trading above 0.8940. The pound is up against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.7530, while GBP/CAD is just above 1.70.
This is a fairly light week for economic data relating to the pound. Earlier today, the BoE's Financial Stability Report suggested that British banks were ready in the event of 'hard Brexit'. However, RBS and Barclays are likely to be the weakest in the event of significant volatility. On Wednesday, we'll see consumer credit and mortgage approvals. On Thursday, we'll get consumer confidence. Finally, on Friday we'll see Markit manufacturing PMI. Last week, the Autumn Forecast Statement suggested a weak outlook for future economic growth.