GBP/USD was flat near the top of its trading range as the greenback weakened on Thursday. What also supported the currency traders are the better than expected post-Brexit data while listening closely to Prime Minister May handling the negotiations quite successfully. Sterling traded close to a three-week high against the dollar and was on track for its best week in six, as worries over the economic impact of Britain’s vote to leave the European Union slowly eases a little after said data. The pound is also on track for its best week in six weeks against the euro, after hitting a two-week high against the single currency on Wednesday.
The CBI’s reported retail sales data strongly bettered expectations in August, advancing to a six-month high level of 9.0 from last month’s reading of -14.0 as the Brexit-induced slump seems to fade. However, this good data failed to return the cable exchange rate to an uptrend. Presently it is trading below the 1.3322 resistance, barely touching it, although it is +0.11% higher at 1.3207, bouncing-off short dips below 1.32 handle. The couple managed to cling onto gains in the Asian trades as the US treasury yields trade in the red even with increased uncertainty over Fed’s rate hike outlook, with all eyes focused on Fed Chair Yellen’s comments due later in the NA session.
Synopsis and Prognosis
The sterling appreciated against the US dollar for the third consecutive day on Wednesday. Highest then was 1.3271 and lowest 1.3159, the following day it was at highs of 1.3262 and lows of 1.3167. At the time of writing, its highest is 1.3231 and lowest 1.3183. It is evident that each rally is getting smaller than the preceding one, and it suggests that a reversal is due.
UK has not decided to proceed with Article 50 yet, and it is not clear what sort of relationship will be negotiated with the EU if they went on with it. However, if the UK wanted access to the EU market, which it must, it would still be bound by many of the regulations and financial commitments it is supposedly trying to break free from.
Investors are closely eyeing this, as well as the UK’s flash GDP data for Q2 2016, scheduled to be released in a few hours, and Fed Chair Yellen’s hints on a rate hike, which investors are now expecting to come out as not so hawkish while the macro-data dependent stance remains intact.
With all these indicators that could result to an upward and downward reaction, it all screams uncertainty and possibly stay that way for the foreseeable future.
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