Trouble For The GBP

Sterling could be facing a new downtrend in the wake of recent events ranging from data to dollar sentiment and the risks of North Korea beginning to dissipate. The currency has been in a downward leg since August 3rd on the heels of the BoE’s monetary policy meeting, which saw an unexpected 6-2 vote to keep interest rates where they are, and subsequent commentary. This weakened disposition was followed more recently by a misses on CPI (-0.1% MoM vs. 0%) and PPI (0% vs. 0.5%).

The GBP/USD pair as of end of day Tuesday settled around 1.2869, after an almost 100 pip decline from 1.2963 on reduced fears of an attack from North Korea and strong Retail data from the U.S. (the first upward surprise in months). The pair currently sits at the 100dma. However, should the pair break down through this level this week and close beneath it, it could be a signal that investors are no longer favoring the pound’s considerable rally of the last several months. Should further U.K. data (such as Unemployment and Retails, due this week) show weakness, the U.S. showing data strengthening further, or any troubling news in regards to Brexit come to investors’ attention, we may very well see a continuing fall of the pound back to mid 2017 level.

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