The British pound is mostly stronger this morning, but is selling off against the euro. The euro is rising sharply after ECB minutes suggested that the Bank was set to communicate a change in its policies in early 2018. This morning, news of a breakthrough in German coalition talks is once again powering the euro higher. Looking at Brexit news, Reuters is reporting that Nigel Farage is warming to the idea of a second Brexit referendum. Farage believes that support for Brexit is stronger today, and that the current negotiation process is watering down the referendum vote. There are no new updates regarding trade negotiations. In general, the pound remains on a strengthening path (particularly against the US dollar) as regional growth continues to accelerate. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.3560. EUR/GBP is up this morning, with the exchange rate above 0.89070. The pound is up against both the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7230, while GBP/CAD is above 1.70.
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.