Will Summer Put Cap On Pound’s Woes?

Pound-watchers hoping for pointers to the currency’s next move – having briefly fallen below $1.30 for the first time since last September – will find slim pickings. On Brexit, with parliament having just gone into recess for the summer, while the data cupboard is bare. Bank of England policymakers are heading for purdah on Friday ahead of their August 2 meeting, although deputy governor Ben Broadbent is due to speak on Monday.

There is little obvious reason why sterling options trading, which has been mostly subdued this year, should pick up. That leaves the pound vulnerable to the ever-strengthening dollar, which will have US PMI and GDP data as well as trade tensions to keep investors interested. But investors will keep in mind that the next big event is that BoE meeting, and so long as the market is still pricing in a rate rise, there will be reluctance to push the pound too low. Until that BoE meeting, investors may be better off looking at the pound’s performance against the euro to get a better picture of sentiment towards the currency. A dovish European Central Bank is keeping the euro becalmed, so this week’s eurozone PMI and retail data and business sentiment surveys will be noteworthy. But analysts are starting to turn their attention to the prospects of a no-deal Brexit and whether such a scenario could drive sterling to parity with the euro. At some point, the EU will respond to Theresa May’s Chequers deal. Summer refuses to offer the pound much respite.

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