The British pound is mixed today, after strengthening last week. Pound sterling is currently flat against the US dollar, while selling off against the euro, the Australian dollar and the Canadian dollar. While GBP enjoyed a solid rebound last week, the pound has been weaker relative to the euro. As we wrote recently, contentious trade negotiations with the EU have kept the currency's appreciation in check. While Theresa May's visit to Germany last week raised hopes, the pound remains weaker relative to the euro today. According to Bloomberg, German Chancellor Angela Merkel was supportive for a bespoke trade deal with the UK. Specifically, she said that a bespoke deal doesn't necessarily mean "cherry-picking" - an issue that Michel Barnier has raised in the past. Despite the good news, reactions in foreign exchange markets have been fairly limited. Our short-term outlook on the pound is neutral, while our medium-term outlook is bullish.
GBP/USD is currently above 1.40. EUR/GBP is up, with the exchange rate above 0.8840. The pound is down against the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.770, while GBP/CAD is above 1.7570.
Looking at UK economic data this week, we’ll get UK employment data as well as UK inflation report hearings. Wednesday is the most important day, and we’ll see the claimant count rate and average earnings. Bank of England Governor Mark Carney will also speak at the inflation report hearings. In recent history, Carney has adopted a more optimistic outlook on the UK economy (raising rate hike expectations). On Thursday, we’ll get Q4 GDP growth figures. Last week, the consumer price index was slightly ahead of expectations.