The pound continues to rally on Brexit-related hopes. As we reported earlier, the Telegraph claimed that the UK and the EU have agreed to a final Brexit bill between 45 and 55 billion euros. Even Theresa May's denial, reported by Sky News, regarding the accuracy of the report hasn't stopped the pound from rallying. Our outlook on the pound remains bullish.
GBP/USD is currently just above 1.3460. EUR/GBP is down today and the pair is currently trading above 0.880. The pound is up against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.7780, while GBP/CAD is just above 1.7340.
This is a fairly light week for economic data relating to the pound. Earlier today, the BoE's Financial Stability Report suggested that British banks were ready in the event of 'hard Brexit'. However, RBS and Barclays are likely to be the weakest in the event of significant volatility. BoE consumer credit was lower than expectations (1.45b vs. 1.5b expected) as were mortgage loans (3.39b vs. 3.6b expected). GfK consumer confidence (-12 vs. -11 expected) and Nationwide house prices (2.5% vs. 2.7% expected) both missed expectations. Finally, on Friday we'll see Markit manufacturing PMI. Last week, the Autumn Forecast Statement suggested a weak outlook for future economic growth.
As the pound rises following Theresa May's calls for an election, we are now bullish on the currency in the medium-term. The pound is now trading within normal conditions. This is based on a range of technical indicators looking at a weekly chart.