Pound sterling is higher against all major currencies except the US dollar today. The British pound is currently the strongest versus the Australian dollar and the Japanese yen. Yesterday, the pound rebounded after news regarding a possible takeover of British pharmaceutical company Shire by Japanese competitor Takeda Pharmaceutical. Significant business investments can temporarily drive a currency higher.
Turning to recent news and events, there are a limited number of developments from the UK driving the currency today. Instead, the pound is trading as a function of international developments. Specifically, the euro is weakening thanks to poor Eurozone growth data, while the US dollar is strengthening thanks to rising US bond yields. While the pound's historically cheap valuation (relative to other major currencies) is one reason to buy the currency, slowing regional growth and US dollar strength is hurting the rally. Our short-term outlook on the pound is now neutral, while our medium-term outlook on the pound remains bullish
GBP/USD is currently above 1.3960. EUR/GBP is down slightly, with the exchange rate above 0.8740. The pound is up slightly against the Australian dollar and flat against the Canadian dollar. GBP/AUD is currently above 1.8440, while GBP/CAD is above 1.7940.
Looking at this week’s economic data from the United Kingdom, traders will be watching upcoming Q1 GDP growth figures. Public sector borrowing figures for March (-£0.262b vs. £1.600b expected) beat expectations. On Friday, the most important day, we’ll get Q1 GDP growth. We’ll also see GfK consumer confidence for April as well as Nationwide housing price growth for April. Last week, March inflation figures were below estimates while Governor Mark Carney downplayed the possibility of a rate hike in May.
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.