Pound sterling is mostly higher today - the British pound is currently the strongest against the US dollar and the euro. Note that the currency is flat against commodity currencies such as the Australian dollar and the Canadian dollar. Yesterday, the pound ended the day slightly higher against most currencies despite a rebound in the US dollar.
In recent history, the British pound has found support at key levels for major pairs including EUR/GBP (0.88) and GBP/USD (1.40). Yesterday's UK manufacturing PMIs (a measure of sentiment in the manufacturing sector) were ahead of expectations, unlike PMIs for other major economies including the Eurozone, the US and Japan. As the outlook for the UK economy is tracking above-expectations, the pound is being supported by good data and rising rate hike expectations. The Bank of England is widely expected to raise interest rates by 0.25% at its next meeting in May. Our short-term and medium-term outlook on the pound remains bullish.
GBP/USD is currently above 1.4060. EUR/GBP is down, with the exchange rate above 0.8720. The pound is flat against the Australian dollar and flat against the Canadian dollar. GBP/AUD is currently above 1.8280, while GBP/CAD is above 1.7990.
This is a fairly light week for economic data relating to the British pound. Markit manufacturing PMIs (March) were ahead of expectations (55.1 vs. 54.7 expected). The BRC shop price index for January (-1.0% vs. -0.8% expected) was slightly worse than previous figures. Later today, we'll see construction PMIs for March. On Thursday, the most important day, we’ll see Markit services PMIs (March). Last week, the final-take of Q4 GDP growth (1.4%) met expectations.
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.