Manages to recover on broad USD weakness, weaker US rates. Bearish bias intact amid dovish Carney’s speech and weak UK fundamentals. Lack of UK macro news and holiday-thinned trading keeps moves limited.
The GBP/USD pair returned to the familiar trading range near 1.2585 region last hour, after having dipped briefly to daily lows at 1.2569 levels. However, the recovery attempts continue to remain capped below the 1.26 handle amid a lack of fresh economic drivers and quiet trading. The US observes Independence Day holiday this Thursday.
The Cable came under heavy selling pressure earlier this week and reached two-week troughs on Wednesday at 1.2557 after the UK manufacturing, construction and services sector activity deteriorated sharply in June and added to increased odds of a Bank of England (BOE) rate cut. The dovish BOE expectations were fuelled by the central bank’ Governor Carney’s growing concerns over the economic outlook that convinced money markets to price in a rate cut over the next 12 months.
However, the spot managed to recover some ground in the US last session after the US dollar tumbled across the board on downbeat US factory orders and ISM services PMI data. Weak US data re-ignited Fed rate cut expectations. Meanwhile, the US President Trump’s comments on currency manipulation also added to the weight on the greenback.
Looking ahead, the major will remain at the mercy of the USD price-action and UK political updates amid a data-empty UK docket and slowing volumes. The GBP markets continue to remain wary over the next Brexit policy to be pursued by the new leadership, as no deal Brexit looks the most likely outcome.