Pound sterling is taking a breather today after falling sharply. Yesterday was a fairly bad day for the currency thanks to Brexit-related fears and strength in the US dollar. Looking at Brexit news, comments from both EU and UK representatives suggested that a transition deal has yet to be worked out. The EU's Michael Barnier said that a transition deal was not guaranteed, while rejecting the idea of a longer transition period. He also stated that the UK must "pick up the pace" in order to strike a deal this year. With only three weeks remaining until a Eurogroup meeting in late March, time is running out to finalize a transition arrangement. On the UK side, Prime Minister Theresa May criticized the draft EU Brexit deal, stating that it would threaten the UK's constitutional integrity. The document was also criticized by the Democratic Unionist Party, the Conservative Party's coalition partner. Looking at recent data, Nationwide house price growth came in below estimates today. Recent economic data from the UK has been fairly weak, mirroring softness in data from other European countries. Our short-term outlook on the pound is neutral, while our medium-term outlook is bullish.
GBP/USD is currently above 1.3750. EUR/GBP is up slightly, with the exchange rate above 0.8860. The pound is up against the Australian dollar and flat against the Canadian dollar. GBP/AUD is currently above 1.7770, while GBP/CAD is above 1.7650.
This is a fairly light week for UK economic data. MPC member Jon Cunliffe said that London's role as a financial center is not limited to the EU. Gfk consumer confidence numbers (-10) met estimates. Nationwide house prices (2.2% vs. 2.6% expected) came in below estimates. Later today, 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.