Pound sterling is mostly lower today. The pound is the weakest against the US dollar, the Australian dollar and the Canadian dollar. Note that the pound is higher against the Japanese yen. Turning to the latest Brexit news, junior Brexit minister Robin Walker said that the UK was very close to a transition deal with the EU. In a speech at the Institute of Directors in London he said that "I want to stress that we are very close to a deal at this time." The pound rallied after the news was announced yesterday. Looking at GBP/USD, the pair managed to rise just above 1.39, but has given up some of its gains today. With limited progress on Brexit, uncertainty continues to weigh on the currency. In our weekly analysis of futures and options positions, we have noted that traders are trimming their positions in the pound. While domestic data and rate hike expectations have helped the pound in recent history, limited progress on trade talks have held back the currency.
Note that Philip Hammond will deliver his Spring Statement in a few hours. If Hammond surprises markets by increasing the pace of government spending, expect the pound to rally accordingly. The government's deficits have been lower than expectations thanks to relatively strong growth. Our short-term outlook on the pound is neutral, while our medium-term outlook is bullish.
GBP/USD is currently above 1.3890. EUR/GBP is up slightly, with the exchange rate above 0.8870. The pound is down against the Australian dollar and down against the Canadian dollar. GBP/AUD is currently above 1.7630, while GBP/CAD is above 1.7830.
Turning to UK economic data, this is an extremely light week for the currency. Given this week's light economic calendar, trading in the pound is likely to be dominated by international news headlines and risk sentiment. Later today, Chancellor Philip Hammond will deliver his Spring Statement. Last week, UK services PMIs were better than expectations while house price data (Halifax house prices and RICS housing survey) were lower than estimates.
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.