The cross refreshes high the past three years to 0.8700 levels on Monday’s session. The pound sank nearly 14% since BREXIT against the euro. Post BOE‘s rate cut, the pound dips seven-session out of eight. The BOE’S next meeting is scheduled on 15 September 2016. The pound bearish bet hits reached to the multi-year highs.
From FT, There were sound reasons to expect continued sterling weakness, said Commerzbank’s Ulrich Leuchtmann — the risk of a feedback loop between the pound’s fall and capital outflows, the lack of clarity about the UK’s future relationship with the EU and likely further weakness in the UK’s current account deficit and net external debt. Although sterling might recover if the political climate changed, he added, “British politics appear to be navel-gazing for now”.
Marc Chandler at Brown Brothers Harriman said, Sterling’s fall is not necessarily problematic for the BoE. “The pass-through into domestic price levels will be seen as a one-off. It seems fairly clear that the BoE will look through it, which means that it won’t stand in the way of additional easing,” said Mr Chandler reported by FT.
What’s on this week?
- UK’s July CPI m/m basis forecast 0.0% vs 0.2% and y/y basis expected to remain at 0.5%
- PPI input m/m forecast 1.0% vs 1.8% and output forecast 0.2% vs 0.2%
“The overall result should be an increase in CPI inflation from 0.5 percent to 0.6 percent yoy with RPI inflation rising from 1.6 percent to 1.7 percent yoy,” Societe Generale reported by Econotimes.
- July jobless claims change forecast 5.1K vs 0.4K
- Claimant count rate forecast 2.2% vs 2.2%
- Unemployment rate forecast remains at 4.9%
Thursday- July retail sales m/m basis 0.0% vs -0.9% and y/y basis forecast 4.1% vs 4.3%
Besides, EU inflation and ECB monetary policy accounts are the key events to be watch.
The cross is trading at 0.8680 on Asia session.
Resistance seems at 0.8700, 0.8770 and 0.8820
Support finds at 0.8620-0.8580, 0.8470 and 0.8400
The weekly 100.fe seems at 0.87 levels. We can observe weekly strong resistance 0.8770 and 0.8820 levels if the price surpasses the 0.870 mark. If not, downward retracement might expect to 0.8600 and 0.8550 before further up move.