The pound fell sharply against most major currencies yesterday, following comments from the Bank of England. Specifically, Deputy Governor Sir Jon Cunliffe recently remarked that the timetable for the next rate hike is an "open question". He also pointed to the weak economic outlook for the UK, amid concerns regarding the forecast. Given expectations for a rate hike in November (following earlier comments from the BoE), the pound is selling off.
GBP/USD is currently just above 1.31. EUR/GBP is flat this morning, and is currently trading below 0.8960. The pound is up sharply against the Australian dollar and flat against the Canadian dollar. GBP/AUD is above 1.70, while GBP/CAD is currently above 1.6650.
This is a fairly light week for the pound. Later today, we'll get Q3 GDP figures. If growth is significantly below expectations, the pound should sell off again on lower rate hike expectations (particularly following comments from the Bank of England on Tuesday). Last week, unemployment figures and inflation met expectations while retail sales were quite weak.
After falling sharply on October 24, we are downgrading the pound to bearish in the short-term. While we had warned that the currency was oversold in early October and was looking due for a rebound, the pound has since re-entered normal trading conditions.
After strengthening in the second week of October, we are now neutral on the British pound. The pound rebounded after senior Conservative Party leaders publicly backed Theresa May, suggesting that rumors of May's resignation were unfounded. The pound has been particularly strong against the US dollar and the euro in recent times. After looking overbought on a range of technical indicators, the pound is now back to trading within normal conditions.