After rising sharply last Thursday, pound traders are turning more cautious today. The pound is flat against the US dollar this morning, but stronger against the euro. Last week, a report in The Times claimed that EU leaders were preparing to offer a two-year Brexit transition deal. The Irish border issue also seemed closer to getting solved after the Irish foreign minister said a breakthrough before the upcoming EU summit was "doable". The pound rose sharply as a result. Today, Theresa May, Jean-Claude Juncker and Michael Barnier are expected to meet to discuss the Brexit bill. Today is the "absolute deadline" for the UK to deliver "sufficient progress" on its divorce offer according to Donald Tusk. If a breakthrough is achieved the pound is likely to rally sharply as a result. For now, the currency is trading cautiously given the importance of a good Brexit deal. Our short-term and medium-term outlook remain bullish.
GBP/USD is currently just above 1.3420. EUR/GBP is down today and the pair is currently trading above 0.8810. The pound is flat against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.770, while GBP/CAD is just above 1.7080.
This week’s economic data includes PMIs, retail sales and industrial/manufacturing production. On Monday we’ll see PMI construction. On Tuesday we’ll see BRC Retail Sales. Finally on Friday we’ll get industrial and manufacturing production. Last week, data relating to housing and home price growth suggested a sluggish outlook for real estate.
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.