This past week has been quite the rollercoaster ride for the British pound. Yesterday, the currency rose sharply following stronger-than-expected GDP growth figures. Year-over-over growth in Q3 registered at 1.5%, beating the average estimate of 1.4% growth. Given better data, this improves the odds of the Bank of England raising interest rates at its upcoming meeting in November. On Tuesday earlier this week, the pound was down after the BoE's Sir Jon Cunliffe remarked that the timetable for the next rate hike is an "open question". Looking at news, EU members began mapping out their trade ties with post-Brexit Britain yesterday. The preparations are intended to accelerate trade discussions if enough progress has been made by the next EU summit in December.
The pound has strengthened against almost all major currencies in the last 24 hours. GBP/USD is currently just above 1.3270. EUR/GBP is up slightly this morning after falling yesterday, and is currently trading below 0.8920. The pound is up sharply against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.72, while GBP/CAD is just below 1.6970.
This is a fairly light week for the pound. Wednesday's Q3 year-over-year GDP growth figures were above expectations (1.5% vs. 1.4% expected). The pound was up sharply on the news. Last week, unemployment figures and inflation met expectations while retail sales were quite weak.
After rising on good GDP growth figures, we are upgrading the pound to bullish 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.