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British pound up following Brexit-induced sell-off

British pound daily update


British pound daily update

The British pound is currently rebounding against all major currencies. Last week, the currency ended the week flat against the US dollar. While the currency made gains at the outset of the week, the pound sold off sharply after May said that the EU and the U.K. were "a long way apart" with regards to a post-Brexit trade deal. Today's GBP/USD trading range is 1.2830 - 1.3340. 

Following May's latest comments on Brexit negotiations, the pound fell sharply last Friday. Looking at the move in more detail, trading volumes in British pound futures surged above 30-day averages and for the fourth consecutive session in a row. As we have written before, changes in currency trading volumes and volatility precede changes in price. The combination of a significant sell-off and accelerating trading volumes is a sign that traders are turning more bearish on the currency. Looking at volatility, underlying volatility in the British pound is trending higher. All else held equal, rising volatility is a negative factor for the currency. As a result, the British pound is more likely to remain weak for the foreseeable future. 

Looking at this week's economic calendar, there are no market-moving events on the schedule. While recent economic indicators suggest that the U.K.'s economy is enjoying some newfound strength, the currency remains weighed down by slowing European growth and the Brexit negotiation process. Beyond regional factors, the pound is also likely to come under increasing pressure as US growth looks shakier going forward. As a 'risk on' currency, the pound tends to weaken during global downturns. Our outlook on the British pound remains bearish. 

GBP/USD is currently above 1.310. EUR/GBP is down slightly, with the pair trading above 0.8960. The pound is up slightly against the Australian dollar and up slightly against the Canadian dollar. GBP/AUD is currently above 1.8020, while GBP/CAD is above 1.6950. 

Date Event Actual Previous
September 21 Public Sector Net Borrowing AUG £-5.889B £3.936B
September 24 CBI Industrial Trends Orders SEP 7
September 25 BoE Vlieghe Speech
September 26 UK Finance Mortgage Approvals AUG 39.584K
September 27 Nationwide Housing Prices YoY SEP 2%
September 28 Gfk Consumer Confidence SEP -7
September 28 Current Account Q2 £-17.72B
September 28 GDP Growth Rate YoY Final Q2 1.2%
September 28 Business Investment YoY Final Q2 2%
September 28 BoE Ramsden Speech

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