The British pound finished a third week of decline in a row. On Monday, the GBPUSD pair is attempting to regain ground and clings to the 1.31 handle. However there are still signs that the currency remains vulnerable to further losses, while the recovery potential is limited.
The key event for the sterling this week is the BoE meeting due on Thursday. The so-called “Super Thursday” will set further tone to the pair and could bring another sell-off should the regulator refrain from hiking rates citing lower inflation. The odds of a hike exceed 85%, according to market expectations. Another concern for the pound is the rising threat of a “no-deal” Brexit as the key issues remain unresolved while the March 2019 deadline is steadily approaches.
Besides, GBPUSD has been trading below the three key moving averages in the daily charts, which points to a bearish technical picture. As such, the short- and medium-term outlook for the pound remains negative, especially against the backdrop of a strong dollar. The immediate support comes at 1.3080. A break below will open the way to 1.2960.
By Helen Rush
Senior Analyst at Capital Markets