GBP Daily Updates

13 April 2018

Pound sterling is mixed today. The British pound is currently flat against the US dollar and the euro. The currency is strengthening against the Japanese yen, while selling off against the Australian dollar. Yesterday, the pound strengthened significantly (especially against the euro). The pound also managed to strengthen against the dollar, despite broad USD strength.  

Turning to the latest news, talks on the future trade relationship between the UK and the EU are set to begin next week. Both sides are looking to conclude a transition deal before October in order to get the agreement through both parliaments. The UK is looking for a detailed trade agreement prior to the UK's exit, while the EU believes there is not enough time to negotiate the details.

Looking at the recent performance of the pound, the currency has been remarkably strong in recent history. As the pound remains undervalued, the currency has done well against its closest peers such as the euro. Traders are also pricing in another rate hike in May. Despite recent strength, the pound is entering an area of significant resistance. Looking at GBP/USD, the pair has failed to close above the 1.43 area in 2018. If the currency can strengthen beyond this region, expect the bull market to continue. Our short-term and medium-term outlook on the pound remains bullish

GBP/USD is currently above 1.4230. EUR/GBP is flat, with the exchange rate above 0.8650. The pound is down against the Australian dollar and flat against the Canadian dollar. GBP/AUD is currently above 1.8270, while GBP/CAD is above 1.790.

This is a fairly light week for economic data relating to the British pound. BRC retail sales (1.4% vs. -0.1% expected) were ahead of expectations. February industrial production (2.2% vs. 2.9% expected) and February manufacturing production (2.5% vs. 3.3% expected) missed expectations by a wide margin. The February goods trade balance (-£10.200b vs. -£11.950b) was ahead of expectations. MPC member Broadbent did not address monetary policy. The BoE credit conditions survey showed a significant drop in unsecured consumer credit. Last week, services PMIs missed expectations by a significant margin. 

Updated 
Outlook
Bullish

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. 

Updated