The pound was fairly mixed yesterday but is stronger this morning (particularly against the US dollar and the euro). Action in the foreign exchange market was dominated by euro strength yesterday. The euro was stronger because German bond yields rose after the country announced a plan to issue more long-dated government bonds next year. While British bond yields also rose yesterday, German bond yields were relatively higher. As such, the pound was weak against the euro. In other news, Bank of England Governor Mark Carney is set to speak today. He is scheduled to testify before Parliament’s Treasury Select Committee on the latest Financial Stability Report (FSR). He is expected to discuss why the BoE is keeping rates on hold despite inflation exceeding 3%. If his outlook for future rate hikes is significantly below the market's forecast, expect the pound to sell off in response. Our short-term and medium-term outlook remain bullish.
GBP/USD is currently just above 1.3390. EUR/GBP is flat today and the pair is currently trading above 0.8830. The pound is flat against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.7470, while GBP/CAD is just above 1.7220.
This is a fairly light week for economic data and events from the UK. On Wednesday, Bank of England Governor Carney is set to make a speech in Parliament. On Thursday we’ll see consumer confidence figures. Finally on Friday we’ll see Q3 GDP growth and the current account. Last week, the Bank of England suggested only gradual increases in future interest rates.
As the pound strengthens on Brexit-related hopes, we are upgrading the currency to bullish in the short-term. The pound is now trading within normal conditions. This is based on various technical indicators on a daily chart.
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.