The British pound was sharply higher yesterday following weakness in the US dollar. The big news on the Brexit front is that pro-EU members of the Conservative Party have passed an amendment that requires parliament to vote on any Brexit deal prior to implementation. A few 'rebel' Conservative MPs and nearly all members of opposition parties voted for the amendment. The new amendment substantially weakens Theresa May's bargaining position and makes a 'softer' Brexit more likely. Later today, the Bank of England will announce its rate decision and issue a statement. While no changes to interest rates are expected, markets will be focused on the Bank's guidance in light of higher-than-expected inflation. Yesterday, unemployment figures came in worse than expected while wage growth met expectations. Our short-term and medium-term outlook remain bullish.
GBP/USD is currently just above 1.3440. EUR/GBP is flat today and the pair is currently trading above 0.880. The pound is down against the Australian dollar and up against the Canadian dollar. GBP/AUD is above 1.7520, while GBP/CAD is just above 1.7260.
This is an important week for economic data and events from the UK. Producer prices met expectations (3%) while the consumer price index (3.1% vs. 3% expected) was higher than estimates. ILO unemployment (4.3% vs. 4.2% expected) and claimant count changes (5.9k vs. 3.2k expected) were worse than expected. Later today, the Bank of England will announce its 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.