The British pound is sharply lower against most major currencies this morning. As the pound continues to trade based on political news, the currency remains fairly volatile. Over the weekend, The Sunday Times reported that 40 Conservative MPs have agreed to sign a letter of no confidence in Theresa May. In order to bring about a change in leadership, Conservatives opposed to May require 48 signatures. As doubts regarding May's ability to govern resurface, the pound is selling off as a result. Looking at Brexit-related news, French newspapers reported that the EU is preparing for a 'no deal' scenario. While Michel Barnier has been trying to persuade the UK to commit to a 'Brexit bill', David Davis has been pushing back against these demands. According to a BBC report, he stated that "in every negotiation, each side tries to control the timetable. The real deadline on this is, of course, December."
GBP/USD is currently just above 1.310. EUR/GBP is up sharply and the pair is currently trading above 0.8890. The pound is down against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.710, while GBP/CAD is just below 1.6620.
This is a big week for economic data releases relating to the pound. On Tuesday, we’ll see producer price index numbers and the consumer price index. Given the Bank of England’s latest rate hike, markets will be closely watching if inflation remains elevated. On Wednesday, we’ll get the claimant count change and the ILO unemployment rate. Finally on Thursday, we’ll see year-on-year retail sales. Last week, BRC retail sales missed estimates while both industrial and manufacturing production were stronger than expected.
After Theresa May considered increasing the size of the UK's Brexit bill, we are upgrading the pound to neutral in the short-term. The pound is trading within normal conditions. This is based on various technical indicators on a daily chart.
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.