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GBPUSD hits a danger zone
Forex
07/18/2018

GBPUSD hits a danger zone

The pound has been nursing significant losses for a second day in a row. The GBPUSD pair slipped from the 1.33 area to fresh one-year low of 1.30, a danger zone, which if broken, could bring another wave of a massive sell-off.

The pound has been nursing significant losses for a second day in a row. The GBPUSD pair slipped from the 1.33 area to fresh one-year low of 1.30, a danger zone, which if broken, could bring another wave of a massive sell-off.

The downside pressure on the sterling came from the resurged USD demand on the back of quite positive comments by the Fed Governor Powell, who dismissed risks from the US trade policy. The sentiment around the pound has also worsened after the BoE head Carney highlighted the risks from a no-deal Brexit scenario.

Meanwhile, the latest macroeconomic data failed to inspire the sterling bulls as the CPI numbers came in lower than expected. So, it’s evident that inflation pressures in the UK are abating despite the weaker currency and high oil prices. This could pose a threat for the BoE rate hike in August, should other data confirm that the economy shows signs of weakness.

However, for the time being, the expectations remain high, though the probability of a hike next month has fallen to 70% from 77% before the release. Tomorrow, the pound will have another test by retail sales data. Should the numbers disappoint, the pair could extend losses. Meanwhile, in the short term, a mild upside correction could take place.


By Helen Rush
Senior Analyst at Capital Markets

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