The British pound was slightly higher yesterday and is trading sideways this morning. As markets anticipate the next phase of Brexit transition talks, calls for a "Canada-style" deal are growing. According to a recent article in the Financial Times (paywall), the EU is likely to deliver an outline of a free trade deal based on the Canadian template next summer. While the agreement will provide access for goods trading, it will prevent British firms from accessing the EU's single market for services. The British economy is dominated by services and the country enjoys a significant trade surplus in this area. Without the ability to continue exporting services to the EU, a Brexit deal is unlikely to have a big positive influence on the pound. Our short-term and medium-term outlook remains bullish.
GBP/USD is currently just above 1.3370. EUR/GBP is up today and the pair is currently trading above 0.8860. The pound is flat against both the Australian dollar and the Canadian dollar. GBP/AUD is above 1.7340, while GBP/CAD is just above 1.7030.
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. GfK consumer confidence figures (-13 vs. -12 expected) were worse than expected. Later today, 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 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.