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Analysts at Scotiabank explained the conditions surrounding the pound with recent data weakening, Brexit headlines and stalling price action.

Key Quotes:  

“Markit/CIPS Services and Composite PMI data weakened more than expected in Oct (52.2 and 52.1 respectively, from 53.9 and 54.1 in Sep), suggesting slowing growth momentum but the GBP has ignored the data and paid more attention to weekend press reports which have bolstered expectations that a Brexit deal is closer.”

“We remain cautious; the elements of an agreement may be falling into place but a definitive arrangement which satisfies the Irish Republic’s worry over the border issue remains in question – as does the degree to which Eurosceptic Tory MPs are willing to back PM May.”

“We rather think that, with the clock running down for an agreement, May is playing a very hardball game with anti-European Conservatives which will effectively put the onus on them to agree or cause a cliff edge Brexit.”

“GBP/USD short-term technicals: neutral/bullish – Sterling firmed sharply last week overall but the broader undertone for the pound is consolidative, rather than bullish.”

“Cable gains have stalled around the 40-day MA (1.3046, just ahead of major retracement resistance at 1.3069) and the market has stalled over the past 24 hours of trading.”

“Support is 1.2940/45 now. Above 1.3050/70 may allow the GBP to retest the Oct high around 1.3320.”