Despite some good news from the UK, the British pound resumed its falls against the US dollar on the latter’s strength. Is there more room to the downside? Here are two opinions from British banks:
Here is their view, courtesy of eFXnews:
GBP/USD Vulnerable But EUR/GBP Likely Has Some Room To Go Lower – Barclays
We see scope for further modest GBP gains versus the EUR, amid better-than-expected UK economic data recently and stretched short GBP positioning.
However, GBPUSD looks vulnerable to a correction lower should a strong US employment report solidify the prospects of a near-term Fed rate hike.
We expect manufacturing firm sentiment (Thursday) to improve marginally in August, teetering around the 50 mark (consensus: 49.6). This would be in line with the August print of the CBI Industrial Trends Survey, which saw volume output expectations ahead marginally rise, likely on improved political certainty since the formation of a new UK Government under Theresa May.
GBP: Staying Short Cable As Long As Spot Remains Below 1.35 – RBS
Sentiment toward UK assets has improved, helped by a range of anecdotal and high-frequency data that suggest the near-term hit to the UK economy may have been less than many feared. These have centred on retail spending, tourism and manufacturing orders. The news on housing has been less active. Mortgage approvals for house purchases were weaker last week, and there are reports of reduced asking prices and weak activity. The sector is also slowing following a front loading of purchases ahead of changes to buy-to-let and stamp-duty.
We believe that the impact of the Brexit vote will be a slow-burn as a combination of weaker investment and real incomes growth on higher inflation is gradually felt. Political noise may rise on Parliament’s return on September 5th. We may get more on the timing of Article 50 and priorities for fiscal policy at the Autumn Statement.
We maintain our negative bias while spot is below 1.35 and expect resistance at 1.3372.
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