Pound sterling is mostly higher today. The pound is currently the strongest against the Japanese yen, the Canadian dollar and the US dollar. Following US inflation figures yesterday which showed moderate inflation, the US dollar sold off. As a result, the pound strengthened against the US dollar. As the outlook for US inflation remains moderate, the dollar is likely to keep weakening (benefiting the pound). Pound sterling also got a boost following Philip Hammond's Spring Statement. Hammond upgraded his growth forecast for 2018 (to 1.5% from 1.4%) while suggesting that public finances were better than expected. While the chancellor did not promise new spending, the government is more likely to accelerate spending in the future.
While domestic data has been supportive of the pound, limited progress relating to a transition deal continues to hold back the currency. Turning to the latest Brexit news, Michel Barnier has said that the UK has yet to face up to the "hard facts" of Brexit. “It’s a fairly astonishing idea to think that the 27 member states and your parliament could accept convergence when the UK wants it, while leaving it at the same time the possibility to deviate when it sees a competitive advantage,” he said. Our short-term outlook on the pound is neutral, while our medium-term outlook is bullish.
GBP/USD is currently above 1.3960. EUR/GBP is flat, with the exchange rate above 0.8870. The pound is down against the Australian dollar and flat against the Canadian dollar. GBP/AUD is currently above 1.7720, while GBP/CAD is above 1.80.
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. Chancellor Philip Hammond upgraded his growth forecast while delivering 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.