GBP/USD broader trend remains negative - Scotiabank

Shaun Osborne, Chief FX Strategist at Scotiabank, GBP/USD has been consolidating the sharp fall seen through late June and remains vulnerable to an extension lower through the consolidation base which currently resides at 1.3005.

Key quotes

“Sterling is trading on the defensive. Q2 GDP data showed a slightly stronger pace of growth (+0.6%) than expected (+0.5%) and some of the details appeared quite strong (manufacturing). But it is the post June trends in the economy that count and the July CBI retail sales survey, showing a decline in the index from +4 to -14 (against expectations of +1) that weighed on the GBP. This was the weakest survey report since 2011 and supports the impression of a slowdown in activity in the aftermath of the referendum. Market focus is increasingly on the August BoE policy meeting.”

“GBPUSD short-term technicals: bearish—GBPUSD losses on the day so far are modest and there is support in the upper 1.30s which may provide some underpinning ahead of the afternoon session.”

“The broader trend here looks negative from our perspective; the market has been consolidating the sharp fall seen through late June and remains vulnerable to an extension lower through the consolidation base which currently resides at 1.3005. Trend strength signals are aligned bearishly and suggest limited scope for GBP rebounds.”