• Pound was rocked by three resignations last night, had a weak session
• Things are always changing in the UK political landscape
In the last 24 hours, the GBP started vibrating again as the UK cabinet received a handful of ministerial resignations. The pound began the week with David Davis resignation followed by Junior minister Steve Baker. The pound remains stable despite Davis and Baker departure in an Asian session, whereas Foreign Secretary Boris Johnson departure caused shaking in the European session.
The week ahead, focus now shifts on Thursday’s events.” The 100+ page “white paper” will be released, laying out in fuller detail the UK’s vision as summarised in the Chequers agreement” reported by TD Securities.
In addition to the political woes, BOE August policy meeting is the other catalyst to be watched closely.
UK Data Review: Services PMI continued the recovery in growth seen since March’s snow-related disruption.
• The manufacturing sector remains subdued at the end of second quarter, PMI broadly unchanged at 54.4 in June
• Construction PMI posted 53.1 in June, up from 52.5 in May. Construction output growth reaches seven-month high in June
• Services PMI posted 55.1 in June, up from 54.0 in May, indicated the fastest expansion of business activity for eight months in June.
The week ahead, the UK monthly GDP is the more interest event to watch. It’s a way of keeping track of how the UK economy is doing. The Office for the National Statistics shifted from quarterly to monthly GDP releases from this week. This week’s ONS report covers the March-May. We still believe, looking over the coming weeks, the official data prints will pave the way to the Q3 rate hike. Recent better than expected PMI survey data (Services PMI) push the August BOE rate hike probability to nearly 80.00%.
The euro cross has been consolidating effectively between 0.8800-0.8900 levels. As we pointed in our earlier notes, the weekly resistances are seemed at 0.8900/0.8920 above this 0.8970 exists. While remains below the weekly supply zone, we foresee a downside risk to re-test the support levels 0.8800 and 0.8760. Flipside side, well settle above 0.8970-0.9000 could rally further to 0.9050/0.9070.
Nothing that, the 50.0% of the fib reaction (0.9599-0.8300 correction) seems to be at 0.8950, and the descending trendline coincides at 0.8920. Overall, between 0.8920-0.8950 we could expect stiff resistance in the week ahead.
Forecast: Remain sidelines
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