As the Fed turns dovish, the case for the Bank of England to remain hawkish is easing gradually. Besides, uncertainty presented by Brexit is adding pressure to the pound again. The combination of these factors makes GBP unloved for some more time, probably up to summer.
UBS Strategist Christopher Swann said, “The Brexit process will likely drag on for some time longer, causing considerable uncertainty for investors.”.
Last week the Monetary Policy Committee voted by a majority of 7-2 to maintain Bank Rate at 0.5%. The press released stated that “All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.”
In terms of last week’s UK economic releases, CPI in May down a bit from April and the Retail sales declined in May.
- The Consumer Prices Index 12-month rate was 2.0% in May 2019, down from 2.1% in April 2019.
- Retail sales monthly growth rate has declined for two consecutive months at negative 0.1% in April 2019 and a negative 0.5% in May 2019.
- At its meeting ending on 9 May 2018, the MPC voted by a majority of 7-2 to maintain Bank Rate at 0.5%.
Relatively it is a quiet week, with Gfk consumer confidence and 1st quarter GDP on Friday.
The cross is consolidating between 0.8975-0.8870 ahead of the key resistance zone seems between 0.8975-0.9030. Breaking below the lower end of the range would increase the chances of a new downturn towards the next support zone available between 0.8830-0.8790.
Flipside, a decisive break above 0.9030 could open the room for 0.9100. In the medium term, the cross will probably touch the 0.9100 level earlier double top pattern before retracing.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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