After falling sharply yesterday, the British pound is flat against most major currencies this morning except the euro. Looking at recent economic data, construction PMIs were lower than expected. This followed manufacturing PMIs earlier in the week that were also lower than expected. In general, manufacturing and construction PMIs are not significant drivers of the pound as the UK is a services-based economy. Services PMIs will be announced later today, and are expected to be strong given good economic growth in the region. Recently announced Nationwide housing prices were also stronger than expected. In general, the British pound remains in a bull market and is deeply undervalued following the Brexit referendum. As regional GDP growth picks up and the euro strengthens, the pound is likely to benefit as well. While the path forward will remain volatile due to the politics of negotiating a trade deal, the general trend is bullish.
GBP/USD is currently above 1.3520. EUR/GBP is up this morning, with the exchange rate above 0.8890. The pound is flat against both the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7230, while GBP/CAD is above 1.69.
This is reasonably light week in terms of economic data relating to the pound. Markit manufacturing PMIs missed expectations (56.3 vs. 58 expected). Construction PMIs also missed expectations (52.5 vs. 52.5 expected). Nationwide housing prices were better-than-expected (2.6% vs. 2% expected). Later today, we'll get consumer credit and mortgage approvals. We'll also get Markit services PMIs. Services PMIs are watched closely given the UK's reliance on the services sector. Prior to the holidays, Q3 GDP growth beat expectations (1.7% vs. 1.5% expected).
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.