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The Longest Day for the pressured pound

Market Analysis

GBPJPY, H4                 

As the longest day dawns in the Northern Hemisphere there is no summer solstice rest bite for the beleaguered British pound. Sterling is back under the cosh, presently showing an average 0.3% decline versus the dollar, euro and yen. Cable is trading under 1.2600 for the first time since April 18, while EURGBP is pushing towards seven-month high territory.  Today’s falls extends declines seen yesterday after BoE Governor Carney pushed back against the hawks at the MPC (three of the nine voted for a 25bp rate hike last week) by saying that now was not the time to be thinking of tightening policy.  Our short positions on GBP remain and we are selling into gains seen after the BoE policy announcement last week, noting data showing average household income dipping to a more acute negative growth figure, and reasoning that recent sterling gains and weaker oil prices should help curb inflationary pressures, potentially offsetting hawkish arguments on the BoE’s MPC. There is also the issue of a delicate political backdrop, with a much weakened prime minister having to cobble together a deal with a small party from Northern Ireland in an attempt to make her minority government work. Brexit is yet another uncertainty, as the official opening of the new UK parliamentary session starts today.

Technically, the short target 2 on Cable remains at 1.2555, the April 18 low. We remain long EURGBP to 0.8840 and target 2 at the 2017 high 0.8865.  GBPJPY netted +50 pips on a H4 yesterday from 141.72 to 141.22, whilst on the Daily chart we hit T1 at 140.51 (+121 pips) and remain short to T2 at 139.50.



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Stuart Cowell

Senior Market Analyst


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