The British pound is mostly weaker this morning. The currency is currently selling off against the US dollar, the euro and the Australian dollar. Looking at economic data, both manufacturing and industrial output were significantly ahead of consensus estimates. On the other hand, the UK's goods trade deficit was larger than expected. As we have written before, the UK is enjoying tailwinds from strong Eurozone growth in recent history. As long as GDP growth in the UK remains on a strengthening path, we expect the pound to continue strengthening. In Brexit news, UK Chancellor Philip Hammond has accused the EU of appearing unwilling to do a trade deal according to the Financial Times. According to Hammond, the EU's stance is making life difficult for pro-EU members of the British government. Brexit headlines over the past few days have not been particularly encouraging. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.3480. EUR/GBP is up this morning, with the exchange rate above 0.8850. The pound is down against both the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7130, while GBP/CAD is above 1.6930.
This is a fairly light week for economic data relating to the pound. Annualized quarter-over-quarter Halifax house prices (2.7% vs. 3.3% expected) missed expectations. Month-over-month BRC retail sales matched the previous figures (0.6%). Manufacturing output (3.5% vs. 2.8% expected) and industrial output (2.5% vs. 1.8% expected) both beat expectations. The goods trade deficit was larger than expected (-£4.7b vs. -£2.6b expected) . Last week, the pound rallied following stronger-than-expected services PMIs.
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.