The pound is mostly flat this morning after falling yesterday. The currency has been selling off after Theresa May and Jean-Claude Juncker failed to come to an agreement relating to Brexit earlier this week. Without more progress relating to the Brexit deal, the pound is more likely to trade sideways. In an earlier commentary, we pointed out that optimism for a deal was looking excessive in the short-term. The pound has weakened since we published our thoughts. In the longer-term, we ultimately expect the pound to rally once Brexit-related uncertainties dissipate. Our short-term and medium-term outlook remain bullish.
GBP/USD is currently just above 1.3370. EUR/GBP is up today and the pair is currently trading above 0.8810. The pound is up against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.770, while GBP/CAD is just above 1.7130.
This week’s economic data includes PMIs, retail sales and industrial/manufacturing production. PMI construction beat expectations (53.1 vs. 51 expected). Earlier today, BRC Retail Sales were higher than the previous print (0.6% vs. -1% prior). Markit Services PMIs were lower than expectations (53.8 vs. 55 expected). Later today, we'll see Halifax house prices. 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.