GBP Daily Updates

29 September 2017

Yesterday was a good day for the pound, as the currency rose on optimism following comments from UK Brexit minister Davis and his EU counterpart Barnier. Specifically, Davis spoke of progress relating to social security arrangements, Northern Ireland and exit payments. While Barnier was more downbeat, he stated that the talks had experienced a "new dynamic". The pound rallied as hopes increased for an eventual Brexit deal. 

After rising to 1.3430, GBP/USD has since fallen back down to 1.3415. Looking at EUR/GBP, the pair made no progress yesterday as the euro itself strengthened. This morning, the pound is selling off against the euro, with EUR/GBP trading closer to 0.8790. While the pound has managed to eke out another gain against the Australian dollar, it has weakened vs. the Canadian dollar. GBP/AUD is currently above 1.7090, while GBP/CAD is now below 1.6680. 

Consumer confidence figures (-9) beat expectations (-11), while markets await final GDP figures later today. GDP figures will be watched closely as the market is expecting the Bank of England to raise rates in the near future.

Updated 
Short term outlook
Neutral

The British pound is back to neutral. The pound initially weakened on September 22, following Theresa May's Brexit speech which disappointed markets and a Moody's downgrade of the UK's sovereign debt. Since then, the pound has mostly traded sideways or weakened mildly. Having been in overbought conditions for some time, we now believe the pound has re-entered normal trading conditions. This is based on various technical indicators when looking at a daily chart. 

Medium term outlook
Bullish

The latest pound bull market began in early September, following indications from the Bank of England that interest rates were set to rise later this year. While we remain bullish in the medium term, the picture is more mixed today with the currency weakening in the last two weeks of September. The pound also looks overbought on a range of technical indicators, thus the medium-term bull market is likely to be near its end. 

Updated