- GBP / USD consolidated after hitting a new high before the Jackson Hole this week.
- Loose monetary policy and its future course is the theme as the August holiday season draws to a close.
The GBP / USD pair is currently trading at 1.3130 after traveling within a range of 1.3053 and 1.3170 on offer as the bulls continue to munch on a depressed US dollar.
Markets are bracing for the major event this week in the Jackson Hole which leaves the US dollar vulnerable and unable to extend its streak of DXY index highs, capped below 93.50. More information on the Jackson Hole below.
GBP Positioning Moves To Five Months HGH
In the meantime, the pound is making an offer in the market despite the uncertainties surrounding Brexit. It is true, however, that the latest positioning data will not have reflected last week’s trading collapse.
During the week ending August 18, the pound showed there was demand for the currency as the net long positioning rallied to a five-month high, catching up with the rally in the spot market of the cable.
The latest round of better-than-expected economic data from the UK has supported the strength of the pound, although some may argue its vulnerabilities have been masked by a weaker US dollar of late.
The better tone of UK data pushed back fears of a negative Bank of England policy rate. In contrast, the latest political developments in the UK have little to offer in sterling,
Rabobank analysts explain.
Referring to Brexit, unless that status quo changes in the coming weeks, analysts are pessimistic about the pound, calling for a higher EUR / GBP cross.
We see the risk of moving to EUR / GBP 0.92 on a 2-3 month view if a compromise on trade with the EU remains elusive.
GBP / USD to climb the Jackson Hole higher?
As for cable, much will depend on the outcome of the Jackson Hole Monetary Policy Symposium later this week.
In view of persistent inflation, the Federal Reserve is expected to indicate that rates could be lower for longer at a symposium on the theme and titled “Navigating the Decade to Come: Implications for Monetary Policy”.
Fed Chairman Powell’s opening speech will provide the market with information on the Fed’s review of monetary policy and expected average inflation targeting.
This could help support the downside arguments for the greenback in these summer markets and in the FOMC which will meet on September 15-16.
Therefore, it might help the buoy wire so far, which is otherwise under review from a fundamental and technical point of view.
Technical case for the GBP / USD decline
Commerzbank analysts are bearish on GBP / USD, noting that last week reversed just ahead of the December 1.3284 high.
The new high of 1.3268 was accompanied by a divergence from the daily RSI and this was coupled with a count of 13. This would allow a corrective pullback.
As the currency pair remains below 1.3284 we would allow a slide to the 1.2814 June high and possibly the 1.2718 support line.