The British pound continues to rise, particularly against the US dollar, but is down relative to the euro, Australian dollar and Canadian dollar. The US dollar is broadly selling off this week after entering overbought conditions last week. Today's RICS housing survey suggested continuing strength in the UK housing market, with figures beating expectations (6 vs. 4 expected). As the pound continues to rebound from previous concerns regarding Theresa May's weak position within the Conservative Party, the short-term rally is more likely to continue. We covered our recent views on the pound in a thought piece recently.
GBP/USD is currently above 1.32, trading close to 1.3230. EUR/GBP is flat this morning (after rising yesterday) and is currently trading above 0.8960. The pound is down against both the Australian dollar and the Canadian dollar, with GBP/AUD around 1.690 and GBP/CAD around 1.6470.
After various survey data points last week, this week will include a fair amount of macroeconomic data for the UK. Retail sales came in quite strong (1.9%) vs. previous figures (1.3%). Tuesday's manufacturing (2.8% vs. 1.9% expected) and industrial production figures (1.6% vs. 0.8% expected) beat expectations. Trade balance data came in very weak (-14.2b vs. -11.2b expected). Today's house price data beat expectations (6 vs 4 expected). Last week's survey data suggested good services growth, while construction and manufacturing PMIs came in below expectations.
After rebounding with strength on October 9, we are upgrading the pound to neutral. Earlier, we warned that the currency was overbought - and this remains the case for now. Earlier, pound sterling was weakening due to a range of disappointments including weaker-than-expected economic data (GDP growth and current account deficits) and falling Bank of England interest rate hike odds.
After maintaining a bullish outlook on the pound since early September (following interest rate hike indications from the Bank of England), we are now downgrading the pound to bearish. The currency has sold off in the last two weeks of September, and the first week of October, thanks to poor economic data, perceived political infighting within the Conservative party and falling rate hike odds. After looking overbought on a range of technical indicators, the pound is now back to trading within normal conditions.