The British pound is slightly higher against its global peers today. Yesterday, the currency weakened against safe haven currencies such as the US dollar and the yen, but rose against the euro. The euro fell following comments from European Central Bank officials. The pound has been fairly weak in recent days thanks to the ongoing stock market rout. The pound tends to sell off when global risk appetite falls. Turning to data, Halifax house prices were below expectations, but this had a limited impact on the currency. Today, markets will be watching the Bank of England's upcoming rate decision and statement. While a rate hike is unlikely, pound speculators are looking for Governor Mark Carney to upgrade his outlook on growth and inflation. In his previous testimony to the UK government, Carney struck an optimistic tone, suggest the possibility for more rate hikes this year. Turning to Brexit news, Michael Barnier has stated that the EU wants to maintain control over financial regulation in the common market after Brexit. This reduces the possibility that the UK's regulatory regime will be seen as equivalent to EU rules. According to Reuters, London financial firms have been looking for ways to avoid being cut out of the single market. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.380. EUR/GBP is flat, with the exchange rate above 0.8820. The pound is up against the Australian dollar and the Canadian dollar. GBP/AUD is currently above 1.7760, while GBP/CAD is above 1.7460.
Looking at UK economic data this week, traders will be focused on upcoming PMIs and a Bank of England meeting. Markit/CIPS services PMIs were below expectations (53 vs. 54.1 expected). BRC retail sales were in line with previous figures (0.6%). Halifax house prices missed expectations (2.2% vs. 2.4% expected). Today is the key day, and markets will be focused on Governor Mark Carney’s outlook for the future. While no rate hike is expected this week, expectations are rising for more rate hikes this year. On Friday, we’ll see industrial and manufacturing output. Last week, Nationwide housing prices were significantly 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 trading within normal conditions. This is based on a range of technical indicators looking at a weekly chart.