The British pound enjoyed another small bounce yesterday and is trading sideways this morning. Given the lack of political headlines in the past few days, the currency has been range bound. Yesterday's unemployment numbers met expectations while the number of new unemployment claims was lower than expected (1.1k vs. 2.3k expected). Later today, we'll see retail sales figures. Other gauges of retail sales (e.g. BRC retail sales) have been very weak and suggest that British consumers have been reluctant to spend. If consumer spending is much weaker than expected, the pound is likely to sell off given the likelihood of lower growth in the future. Our outlook on the pound remains neutral in the short-term.
GBP/USD is currently just above 1.3170. EUR/GBP is flat and the pair is currently trading above 0.8950. The pound is flat against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.7330, while GBP/CAD is just above 1.680.
This is a big week for economic data releases relating to the pound. Producer price index numbers (3% vs. 3.1% expected) and consumer price index figures (3% vs. 3.1% expected) were both below expectations. The unemployment rate met expectations (4.3%) while the number of new claims was lower than expected (1.1k vs. 2.3k expected). Later today, 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.
As the pound enjoys a rebound, we are upgrading the currency 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.