GBP breaks to fresh lows as BoE highlights FX risk to inflation – Scotiabank

FXStreet (Barcelona) - Eric Theoret, CFA, CMT, Currency Strategist at Scotiabank, notes that GBP/USD risks further downside after falling to fresh lows post BoE minutes.

Key Quotes

“GBP is weak, having broken to fresh lows in response to a dovish turn in the BoE minutes and compounded by the simulta-neous release of disappointing employment data (soft wages and flat unemployment rate).”

“The BoE minutes release detailed concerns about the impact of policy divergence vs the ECB, driving strength in the exchange rate and potentially restraining inflation.”

“The BoE minutes also spoke to uncertainty related to political developments, weighing on the exchange rate while having no apparent impact on capital spending.”

“Near term risk centers on the UK Budget release at 8:30am EST followed by the Fed events later in the NA session.”

“GBPUSD short-term technicals: bearish—fresh lows in GBP and acceleration in bearish momentum indicators highlight the risk of further downside. The RSI at 27 provides for ample downside before reaching oversold levels at 20.”