The British pound is higher against most currencies today, as the US dollar weakens while pound sterling receives support from rising rate hike expectations. In an article in the Sunday Times (paywall), the Bank of England’s Deputy Governor Dave Ramsden stated that interest rates may need to rise faster if wages grow according to the Bank's expectations. Wage growth figures met consensus estimates last week, although the number of new jobs was below expectations. While the pound has been weighed down by tough Brexit negotiations in recent history, the currency has been supported by a rising hopes for more rate hikes this year. Odds for a rate hike this coming May are currently above 80%. Turning to Brexit news, Labour leader Jeremy Corbyn is likely to indicate support for staying in the customs union according to Reuters. The move further weakens Theresa May's hold on power, as Conservatives are more likely to lose power if they push for leaving the customs union. Theresa May has previously ruled out remaining in the customs union, as this would prevent the UK from negotiating trade deals independently. 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 down, with the exchange rate above 0.8780. The pound is flat against the Australian dollar and up against the Canadian dollar. GBP/AUD is currently above 1.7790, while GBP/CAD is above 1.7690.
This is a fairly light week for UK economic data. On Monday, we’ll see Nationwide house prices. MPC member Jon Cunliffe will also be speaking. On Wednesday, we’ll see Gfk consumer confidence numbers for February. On Thursday, we’ll see Markit manufacturing PMIs, consumer credit and new mortgage approvals. On Friday, we’ll get construction PMIs. Last week, BoE Governor Mark Carney provided an upbeat outlook for growth and inflation in the UK this year.