Pound sterling is currently mixed. The British pound is making gains versus the US dollar and the Canadian dollar, while selling off against the Australian dollar and the Japanese yen. Over the past few trading sessions, the pound has been weakening (particularly against the US dollar and the euro). While the currency surged last week following the announcement of a Brexit transition deal, the pound has been unable to hold on to its gains. While news of a transition deal is a positive development, significant uncertainties (such as the question of the Irish border) remain.
With less than one year remaining to Brexit, there has been little tangible progress. While the UK and the EU have negotiated an outline of transition terms, items including separation terms, the future status of Northern Ireland and a post-Brexit trade deal remain in the works. While recent economic data from the UK has been better than consensus expectations, the future outlook remains cloudy. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.4040. EUR/GBP is flat, with the exchange rate above 0.8760. The pound is down against the Australian dollar and flat against the Canadian dollar. GBP/AUD is currently above 1.8240, while GBP/CAD is above 1.8090.
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. Year-over-year Nationwide housing prices (2.1% vs. 2.6% expected) were lower than expected. GfK consumer confidence for March (-7 vs. -10 expected) was better than expected. The final-take of Q4 GDP growth (1.4%) met expectations while the current account (-£18.4b), year-over-year Q4 business investment (+2.6%), consumer credit (£1.647b) and lending to individuals (£5.4b) all beat expectations. Mortgage approvals (63.910k) were slightly below expectations. 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.