Cable remains weak and could extend the drop to the 1.25/1.20 area in the next months, suggested FX Strategists at Scotiabank.
“The GBP is soft versus the USD but has gained modestly versus the EUR on the session amid better than expected UK data on the whole – a narrower trade deficit, better industrial production (including manufacturing and robust construction data) and in-line-with-expectations GDP for Q2 at +0.4% Q/Q (1.3% Y/YU). Jun GDP was a little disappointing at +0.1% M/M, however, versus +0.2% expected. Brexit risks remain prominent for the GBP, however, and the pound’s overall softness is unlikely to improve while talks between the EU and UK remain at an apparent impasse and “hard Brexit” concerns continue to simmer”.
“With Cable trading on a 1.27 handle, technical prospects look somewhat bleaker for the GBP. We noted major retracement support at 1.2810 previously and with the pound struggling to regain 1.29, and extending below major retracement support at 1.2810 (61.8% of the 1.185/1.44 move up), downside risks are rising. We think GBPUSD may slide towards 1.25/1.20 in the coming months”.