After ending the day higher yesterday, the British pound continues to make gains this morning. The pound is higher against all major currencies including the US dollar and the euro. Yesterday, the pound rallied after services PMIs beat expectations by a wide margin. Given that services dominate the UK's exports, the currency is particularly sensitive to expectations regarding the sector. As forward-looking data continues to suggest strong growth, the pound bull market looks intact. In a broader commentary published yesterday, we wrote that the longer term outlook for the pound remains bright. Thanks to strong regional growth and the low value of the currency (relative to other currencies), the pound looks set to keep strengthening. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.3560. EUR/GBP is down this morning, with the exchange rate above 0.8890. The pound is up against both the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7280, while GBP/CAD is above 1.6940.
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). Markit services PMIs beat expectations (54.2 vs. 53.8 expected). The pound rallied following services PMI numbers. 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.