The British pound is higher today. The pound is strengthening against all major currencies today, except the euro. Looking at GBP/USD on a daily and weekly chart, the pound is once again looking overbought according to technical indicators. Last week, the pound corrected after moving into overbought territory. Looking at recent news, Mark Carney's comments helped the pound yesterday after he claimed that the Bank of England will refocus on fighting inflation. He said that there had been "gradual firming" in the private sector and that wages appear to be slowly rising as well. While the bank was previously concerned about stagflation (low growth and high inflation), these concerns appear to be subsiding. As Carney's outlook increases the probability of future interest rate hikes, the pound rose accordingly. Looking at recent figures, BoE consumer credit and mortgage approvals were ahead of expectations. The volume of mortgage lending, however, was below expectations. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.420. EUR/GBP is flat, with the exchange rate above 0.8750. The pound is up against the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7550, while GBP/CAD is above 1.7460.
This is a reasonably light week for economic data relating to the pound. BoE consumer credit (£1.52 vs. £1.3b) and mortgage lending (£3.68b vs. £3.45b) were ahead of expectations. Mortgage approvals (61.0 vs. 63.5 expected) were below expectations. Gfk consumer confidence (-9 vs. -13) was better than expected). 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.