The British pound is mixed this morning. While the currency is slightly higher relative to the US dollar, it is losing steam against other currencies such as the euro and the Australian dollar. Looking at technical indicators, the pound is looking fairly overbought on a daily chart. Upcoming retail sales data later today should provide cues regarding future GDP growth. In general, economic data from the United Kingdom remains above expectations despite the impact from Brexit. Looking at the latest Brexit news, the Financial Times is reporting that French President Emmanuel Macron has claimed that the UK must make contributions to the EU's budget and abide by rules in order to gain access to its financial services market. Without agreeing to EU regulations, Macron has offered a trade deal in line with the Canadian deal signed in recent history. The EU-Canada agreement mostly covers goods, while the majority of the UK's exports are focused on services. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.3890. EUR/GBP is flat, with the exchange rate above 0.8810. The pound is flat against the Australian dollar while gaining against the Canadian dollar. GBP/AUD is currently above 1.7340, while GBP/CAD is above 1.7260.
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). Later today, 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.