The British pound is looking mixed at the start of the week. While the currency is selling off against the US dollar today, it is mostly flat against major peers. Looking at politics, several news outlets are reporting that pro-Brexit members of the Conservative Party have asked Theresa May to sack Chancellor of the Exchequer Philip Hammond. According to Bloomberg, Hammond angered pro-Brexit elements of the party by insisting that the EU and UK economies would move "very modestly apart" following Brexit. Many in the Conservative Party would like the UK to leave the EU's single market and customs union entirely. Last week, US President Trump criticized May's handling of the Brexit negotiations, claiming he would be tougher on the EU. So far, news of political infighting has had a limited impact on the pound. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.4120. EUR/GBP is up slightly, with the exchange rate above 0.8780. The pound is flat against the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7460, while GBP/CAD is above 1.7430.
This is a reasonably light week for economic data relating to the pound. Later today, we’ll see Nationwide housing prices. On Tuesday, we’ll see consumer credit and mortgage approvals. On Wednesday, we’ll see Gfk consumer confidence. On Thursday, we’ll get Markit manufacturing PMIs. Finally, on Friday we’ll get construction PMIs. Last week, Q4 GDP growth was ahead of expectations.
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.