Pound sterling is mostly higher today. The pound is currently the strongest against the Canadian dollar, the US dollar and the Australian dollar. Note that the pound is lower against the Japanese yen, as the yen gains thanks to safe haven flows and renewed political risks in Japan. Despite a broad USD rebound yesterday, GBP/USD was only lower by a small degree. Other regional currencies (such as the euro) were down sharply against the US dollar. Despite the risk of a disappointment, the pound is being supported by hopes for a transition deal ahead of next week's EU summit.
Turning to the latest Brexit news, the Irish border issue remains the biggest obstacle to a transition deal. According to a report from Reuters, some have said that the issue is a complete stalemate. Theresa May strongly rejected the EU's proposal to maintain an open border with Ireland, stating that no UK Prime Minister would agree to the terms. While the UK is looking to address the Irish border issue alongside a post-Brexit trade deal, the EU is looking for clarity on the border as part of a transition deal. According to an EU diplomat, "unless Ireland is sorted out, there is no transition deal at the summit." Further negotiations have been scheduled over the weekend, and UK officials are expected to travel to Brussels early next week. Our short-term outlook on the pound is neutral, while our medium-term outlook is bullish.
GBP/USD is currently above 1.3940. EUR/GBP is up slightly, with the exchange rate above 0.8830. The pound is up slightly against the Australian dollar and up against the Canadian dollar. GBP/AUD is currently above 1.7880, while GBP/CAD is above 1.82.
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.