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British Pound Talking Points

The British Pound continues to depreciate against the U.S. dollar[1] despite an upward revision in the U.K. Gross Domestic Product (GDP) report, and recent price action keeps the near-term outlook tilted to the downside as the Relative Strength Index (RSI) pushes into oversold territory.

Image of daily change for major currencies

GBP/USD Remains Vulnerable as Adjusted U.K. GDP Fails to Curb Losses

Image of daily change for gbpusd

The limited reaction to the 1.3% expansion in the U.K. growth rate keeps GBP/USD[2] vulnerable to further losses as the exchange rate continues to carve a series of lower highs & lows, and the ongoing uncertainty surrounding Brexit may continue to produce headwinds for the British Pound as the Bank of England (BoE) responds to the growth threat of a no-deal.

Recent comments from BoE Governor Mark Carney[3] suggests an unfavorable outcome may derail the central bank from its hiking-cycle as it would have a negative impact on the U.K. economy, and the Monetary Policy Committee (MPC) may sound more cautious at the next meeting on September 13 as ‘the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of EU withdrawal.

Image of IG client sentiment

At the same time, the IG Client Sentiment Report[4] shows retail sentiment at extremes, with 74.4% of traders still net-long GBP/USD even though the exchange rate slips to fresh yearly lows. In fact, traders have remained net-long since April 20 when GBP[5]/USD traded near 1.4090 region; price has moved 9.3% lower since then. A deeper look shows that the number of traders net-long is 0.1% lower than yesterday and 3.0% higher from last

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