The pound has recovered on Friday, fuelled by comments by Trump criticizing the dollar’s strength. The USD index retreated from one-year highs as a result and paved the way for a recovery in major currencies. GBPUSD rose from ten-month lows below 1.30 and reached the 1.3150 area, just ahead of the 20-DMA at 1.3180.
As the UK parliament starts its summer recess this week, market focus will gradually shift from politics to the upcoming Bank of England meeting due next week. Most traders expect the central bank to hike rates despite the dismal CPI and retail sales data published last week. So, should the regulator refrain from further tightening, the sterling bulls will be heavily disappointed.
Meabwhile, investors will continue to follow Brexit developments down the road as markets are now waiting for Brussel’s reaction to London’s plans and proposals. Against the backdrop of the lingering uncertainty around the “divorce” process and a limited nature of the downside pressure on the greenback, the pound will remain on the defensive for now. The immediate upside target for the pair lies at the 20-DMA, while the nearest support comes at 1.31.
By Helen Rush
Senior Analyst at Capital Markets