The cross refreshes a seven-year high 0.9600 on last Friday’s early Asia session. The first half of the year filled with BREXIT. Since a week, hard BREXIT occupied the headlines, pressure the pound further.

Last Sunday, Theresa May said, “The timing of Article 50 is to be “no later than the end of March next year.”

Review:

  • At 55.4 in September, up from 53.4 in August, the seasonally adjusted Markit/CIPS Purchasing Managers’ Index rose to its highest level since June 2014.
  • UK Construction Purchasing Managers’ Index registered 52.3 in September, up from 49.2 in August
  • The Business Activity Index remained above the no-change mark of 50.0 in September, at 52.6, signalling growth of UK services output.
  • UK Annual house price growth eases further to 5.8%
  • In August 2016, UK manufacturing grew by 0.2% compared with July 2016
  • The deficit on trade in goods was £12.1 billion in August 2016, widening by £2.6 billion from July 2016.
  • Monthly estimates of GDP suggest that output grew by 0.4 per cent in the three months ending in September 2016 after growth of 0.5 per cent in the three months ending in August 2016
  • UK BRC September same-store sales up 0.4%, expected 0.3%, the previous value of -0.9%.

Telegraph reported, with a headline : Government expected to announce shift away from quantitative easing

The sharp drop in Sterling raising concerns about inflation. The pound drops nearly 30% against the euro.

Credit Suisse, “Weaker sterling, higher oil prices and the possibility of a looser fiscal policy/tighter monetary policy framework in the UK imply that markets are now pricing in a much higher inflation outlook”

Preview: BOE Governor Mark Carney Due to speak at the future forum, in Birmingham

Technical view: At all time frames the RSI indicating an overbought zone but the cross has been maintaining a bullish stance.

Deutsche Bank reported, Our models suggest EUR/GBP is at fair value around current levels  while historically the cross has tended to trade in a 20% under and overshoot range. On a FEER, or sustainable current account basis, sterling is still close to 10% overvalued.

Key support levels: 0.8980, 0.8900 and 0.8800

Key resistance levels: 0.9100, 0.9200 and 0.9400 levels.

During this week, between 0.9150 and 0.9250 bulls might face strong resistance. We expect selling (technical correction) around these levels, if not we can expect 0.9400 and 0.9450 levels.