After falling sharply last Friday, the pound is rallying this morning. The currency is up against a wide range of currencies including the US dollar, the euro and the Canadian dollar. Thanks to a rebound in the Australian dollar, GBP/AUD is currently flat. Looking at news, Reuters is reporting that the UK's chief Brexit negotiator, David Davis, has claimed that the recent EU deal is more a "statement of intent" as opposed to a legally binding measure. His Irish and EU counterparts have insisted that the agreement needs to be binding before trade talks can commence. He also remarked that the preferred EU/UK trade deal will look like "Canada plus plus plus". Given the recent EU free trade deal with Canada, Davis suggested that a future trade deal with the EU should build upon the Canadian agreement. 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 0.8780. The pound is flat against the Australian dollar and up against the Canadian dollar. GBP/AUD is above 1.780, while GBP/CAD is just above 1.7210.
This is an important week for economic data and events from the UK. On Tuesday we’ll see both producer prices and the consumer price index for November. Given steep expectations, there is a risk of a disappointment. On Wednesday we’ll get ILO unemployment and claimant count changes. Thursday is the big day, with a Bank of England rate decision and statement. While the Bank is widely expected to remain on hold, markets will be focused on the BoE’s inflation outlook for 2018. Last week, the pound rallied and then sold off following an agreement with the EU on the Irish border, the Brexit bill and the rights of EU citizens following Brexit.
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.