The British pound is mixed today. The pound is currently flat against the US dollar and the euro. While the currency is weakening against the Japanese yen, the pound is up against the Australian dollar and the Canadian dollar. Looking at GBP/USD yesterday, the pair recovered after initially falling sharply. Thanks to a rebound in US stock markets (the S&P 500 rebounded by 1.74% yesterday), the pound has made up most of its losses. In general, the pound tends to weaken during downturns. On the other hand, safe haven currencies such as the US dollar tend to strengthen during downturns. Looking at the latest Brexit headlines, the EU has proposed to cut UK market access to the EU if the country breaks the terms of its transition agreement. According to the Financial Times (paywall), the EU's proposal was recently circulated in a draft. In general, the Brexit negotiations have been getting tougher. After the EU turned down the City of London's proposal for a post-Brexit free trade deal, Theresa May is said to have rejected the EU's initial transition deal terms. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.3960. EUR/GBP is up slightly, with the exchange rate above 0.8870. The pound is up against the Australian dollar and flat against the Canadian dollar. GBP/AUD is currently above 1.7730, while GBP/CAD is above 1.7460.
Looking at UK economic data this week, traders will be focused on upcoming PMIs and a Bank of England meeting. Markit/CIPS services PMIs were below expectations (53 vs. 54.1 expected). Earlier today, BRC retail sales were in line with previous figures (0.6%). Later today, we’ll see Halifax house prices. Tomorrow is the key day, and markets will be focused on Governor Mark Carney’s outlook for the future. While no rate hike is expected this week, expectations are rising for more rate hikes this year. On Friday, we’ll see industrial and manufacturing output. Last week, Nationwide housing prices were significantly ahead of expectations.