The British pound continues to strengthen. GBP/USD is up today and now trading above 1.42. The pound is also slightly stronger relative to the euro and the yen. Yesterday, the pound strengthened sharply. Looking at economic data, new jobs and average earnings were both ahead of expectations. Strong jobs numbers suggest that the British economy recovery is doing well, and raises the outlook for higher interest rates in the future. The pound is also benefiting from optimism regarding a Brexit trade deal. French President Emmanual Macron's comments earlier in the week suggest that the EU is willing to make some compromises with regards to including financial services as part of a broader trade agreement. Thanks to strong regional growth and weakness in the US dollar, the longer-term pound rally looks intact. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.4270. EUR/GBP is down slightly, with the exchange rate above 0.870. The pound is flat against the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7650, while GBP/CAD is above 1.7580.
Looking at economic data this week, markets will be watching jobless claims and Q4 GDP figures. The claimant count was above expectations (8.6k vs. 5.4k expected) while average earnings (2.4% vs. 2.5% expected) and new jobs (102 vs -13k expected) were ahead of expectations. 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.