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The pound dropped on Thursday after the Bank of England mentioned it discussed operational consideration of negative interest rates. Analysts at TD Securities, think cable is likely to remain confined to familiar ranges until fresh catalysts arise. They point out investor’s sentiment should continue to drive GBP’s direction. 

Key Quotes: 

“With support at 1.2877 containing the pullback in GBPUSD, at least so far, we are inclined to look for the pair to continue consolidating within familiar ranges over the very near term. Recent tops in the 1.3005/35 zone now seem well-established ahead of a fresh directional catalyst. The same can be said when looking to the downside. Our reading of the tea leaves sees multiple and overlapping layers of potential supports spanning down to the 11 Sept lows at 1.2763. 

“We think risks are now tilted in favour of a deeper correction in GBPUSD. This comes as the dollar has seen a decent round of short covering in the wake of this week’s FOMC policy decision. While mediumterm dynamics favour a weaker USD overall, positioning considerations could see its recent rebound extend a bit further. Here, for example we will be keeping a close eye on the 1.1696 level in EURUSD. Given that pair’s relative weight and importance in overall FX market direction, we think a push lower may be a signal that a larger USD rebound was underway. This would be amplified, we think, if the pair closed below that point on a weekly basis.”