The British pound is rallying this morning, and particularly against the US dollar. Thanks to both weakness in the US dollar and optimism for growth and a Brexit trade deal, the pound continues to soar. The pound is mostly flat against other currencies include the euro and the Japanese yen. While economic growth since the Brexit referendum has trailed growth in the Eurozone, the United Kingdom defied predictions of a recession in 2017. Indicators such as wage growth and house price growth suggest a positive outlook for 2018. Looking at GBP/USD, the pair didn't hold on to all its gains yesterday, however it has tested 1.39 several times today. As we have written before, ongoing optimism for global growth should keep the pound on a strengthening path. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.3880. EUR/GBP is flat, with the exchange rate above 0.8810. The pound is up slightly against the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7360, while GBP/CAD is above 1.7240.
Looking at economic data this week, markets will be watching inflation and retail sales numbers. The consumer price index (3%) met expectations while the retail price index (4.1% vs. 3.9% expected) was ahead of expectations. Markets tend to focus on CPI instead of RPI figures. The RICS housing price balance was ahead of expectations (8 vs. 0 expected). Tomorrow, we'll see retail sales. Last week, manufacturing and industrial output beat expectations.
As the pound strengthens on weakness in the USD and Brexit hopes, we are upgrading the currency to bullish in the short-term. The pound is now looking overbought. This is based on various technical indicators on a daily chart.
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.