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British pound mostly higher as transition deal hopes grow

British pound daily update


British pound daily update

Pound sterling is trading higher today. The pound has done remarkably well against the euro in recent history, having strengthened against the currency for the last 7 trading sessions in a row. Today, the pound is stronger against all major currencies except the yen. Pound sterling is currently the strongest against the US dollar and the Australian dollar.

Turning to the latest Brexit news, David Davis has said that the UK "can live with" a shorter Brexit transition period according to the BBC. The Brexit Secretary also said that his main priority was securing a transition deal prior to the next week's EU summit in Brussels. The EU is looking for the transition deal to end on December 2020, coinciding with its seven-year budget cycle. As we written before, we expect the UK to make more concessions in order to strike a transition agreement. Given Theresa May's desire to secure a "smooth and orderly" exit and parliamentary oversight over any Brexit deal, the UK is more likely to concede on some of its "red lines" (such as the free movement of people or ECJ jurisdiction during the transition period). The real test, agreeing to a post-Brexit trade deal, remains on the horizon. Our short-term outlook on the pound is neutral, while our medium-term outlook is bullish. 

GBP/USD is currently above 1.3970. EUR/GBP is down, with the exchange rate above 0.8840. The pound is up against the Australian dollar and up against the Canadian dollar. GBP/AUD is currently above 1.7770, while GBP/CAD is above 1.81.

Turning to UK economic data, this is an extremely light week for the currency. Given this week's light economic calendar, trading in the pound is likely to be dominated by international news headlines and risk sentiment. Chancellor Philip Hammond upgraded his growth forecast while delivering his Spring Statement. Last week, UK services PMIs were better than expectations while house price data (Halifax house prices and RICS housing survey) were lower than estimates. 


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