The British pound is mostly flat today. The currency was very strong yesterday, and rose sharply against its major global peers including the US dollar, the euro and the Japanese yen. In general, the pound is benefiting from optimism for a Brexit trade deal. Following French President Emmanuel Macron's comments last weekend, traders are increasingly optimistic that a future trade deal with the EU will include financial services. Historically, the EU has emphasized that the UK's financial services industry will not have any special arrangement after it departs the union. Macron's recent comments suggest that the EU is softening its stance, given that London is the primary financial center for the region. Specifically, he stated that the EU would be willing to offer "something perhaps between this full access and a trade agreement". Note that the pound is looking overbought on a daily and weekly timeframe against the US dollar, and may be due for a short-term correction. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.3960. EUR/GBP is flat, with the exchange rate above 0.8760. The pound is higher against the Australian dollar while trading sideways against the Canadian dollar. GBP/AUD is currently above 1.7490, while GBP/CAD is above 1.740.
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, 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 continues to strengthen, we are now bullish on the currency in the medium-term. The pound is now looking overbought. This is based on a range of technical indicators looking at a weekly chart.