The British pound is mixed today. The currency is mostly flat against the US dollar, the euro and the Australian dollar. Last Friday, the currency sold off following fairly poor retail sales figures that were much lower than expectations. The pound has been remarkably strong in recent times thanks to optimism for a Brexit trade deal. Last week, French President Emmanuel Macron hinted that a trade deal that included a provision for financial services was possible if the UK was willing to make the appropriate concessions. Specifically, he stated that May's current positions made full access to the single market impossible. However, the EU would be willing to offer "something perhaps between this full access and a trade agreement". As most Conservative Party members oppose the free movement of people as well as the jurisdiction of the European Court of Justice, Theresa May's options for negotiating a trade deal that includes financial services are fairly limited. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.3870. EUR/GBP is flat, with the exchange rate above 0.8810. The pound is slightly higher against the Australian dollar while trading sideways against the Canadian dollar. GBP/AUD is currently above 1.7360, while GBP/CAD is above 1.730.
Looking at economic data this week, markets will be watching jobless claims and Q4 GDP figures. On Wednesday, we'll see the claimant count, average earnings and the ILO unemployment rate. On Friday, we'll see Q4 GDP. Last week, inflation figures met expectations while retail sales were much lower than expected.
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.