The British pound is mostly flat today after selling off (primarily against the US dollar) yesterday. Looking at the latest Brexit news, Theresa May has rejected separate rules for Northern Ireland and the oversight of the European Court of Justice over the final deal. According to Bloomberg, the upcoming draft treaty set to be released by the European Union is likely to infuriate anti-EU elements within the Conservative Party. With just three weeks remaining to finalize the terms of a transition deal (ahead of a Eurogroup meeting in late March), the two sides continue to disagree over many substantive matters. Following Labour leader Jeremy Corbyn's decision to pursue a customs unions with the EU, May is under increasing pressure from both pro and anti-EU elements in her party. Eight pro-EU conservatives are now supporting the idea of a customs union. The latest Brexit uncertainties are likely to dampen the medium-term rally while keeping volatility elevated. Our short-term outlook on the pound is neutral, while our medium-term outlook is bullish.
GBP/USD is currently above 1.390. EUR/GBP is up slightly, with the exchange rate above 0.8790. The pound is down against the Australian dollar and flat against the Canadian dollar. GBP/AUD is currently above 1.7810, while GBP/CAD is above 1.7750.
This is a fairly light week for UK economic data. MPC member Jon Cunliffe said that London's role as a financial center is not limited to the EU. Gfk consumer confidence numbers (-10) met estimates. Tomorrow, we’ll see Markit manufacturing PMIs, Nationwide house prices, consumer credit and new mortgage approvals. On Friday, we’ll get construction PMIs. Last week, BoE Governor Mark Carney provided an upbeat outlook for growth and inflation in the UK this year.
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.