Pound sterling is currently lower against all major currencies. The pound is currently the weakest against the US dollar, the Canadian dollar and the Japanese yen. While there is no obvious catalyst for the pound's significant move, the currency tends to sell off prior to the end of each month. This is because the UK's monthly contributions to the EU's budget are due at the end of each month, creating demand for euros in exchange for pounds. The pound may be weakening as a result.
Turning to the latest Brexit news, David Davis has clarified that the UK is unlikely to accept the EU's language regarding a backstop to the Irish border issue. According to the BBC, Davis has accepted the need for a backstop while rejecting the EU's current proposal. Yesterday, the pound moved higher after the Labour Party proposed an amendment to the Brexit bill preventing the UK from leaving the EU without a deal. Labour’s Brexit spokesman, Keir Starmer, stated that “our amendment would make it clear that, should the prime minister’s deal be defeated, it must be for Parliament to say what happens next, not the executive.” Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.4110. EUR/GBP is up, with the exchange rate above 0.8770. The pound is down against the Australian dollar and down against the Canadian dollar. GBP/AUD is currently above 1.830, while GBP/CAD is above 1.8150.
This is a fairly light week for economic data from the United Kingdom. The Bank of England's Financial Policy Committee minutes suggested that the BoE considered increasing the amount of money banks must set aside to counter an increase in lending. So far, the BoE has held off on making any changes. Thursday is the key day, and we'll get the second-take of Q4 GDP growth, February mortgage approvals, Nationwide housing prices, the current account and Q4 business investment. On Friday, we'll see GfK consumer confidence for March. Last week, the announcement of a Brexit transition deal sent the pound soaring.
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.