The British pound is stronger today against all major currencies except the US dollar. Yesterday, the currency strengthened in spite of lower-than-expected manufacturing PMIs. GBP/USD was also helped by US dollar weakness. Given the importance of professional services exports, services PMIs are the key indicator to watch for the pound, and they are scheduled to be released next Monday. Last month, the pound strengthened following strong services PMIs. As we wrote in a recent commentary, monetary policy expectations should help the pound this year. Traders will be closely watching the Bank of England's upcoming policy meeting for cues regarding future interest rate hikes. Rate hike odds for May are currently 50%. 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 0.8760. The pound is up against the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7810, while GBP/CAD is above 1.780.
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). Nationwide housing prices beat expectations (3.2% vs. 2.5% expected). Markit manufacturing PMIs were lower than expectations (55.3 vs. 56.5 expected). Later today, 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.