Thursday, August 21, 2014

British Pound under pressure | Will Jackson Hole make a difference?

Following mixed signals from the governor of the Bank of England, Mark Carney, the British pound has been in a definite decline since the heady rises it saw up to the middle of July.

Apart from anything else, this is an indication of the speed with which sentiment can change in the Foreign Exchange markets.

As our view is that the British unit’s dominant trend is upward we have not taken a position in relation to this fall, which represent a countertrend.

It can be seen in the weekly chart above that Cable, or the GBPUSD pair, has sliced through support in the 1.67 area and is now heading for the next price that could represent a check to its fall, at 1.646. This move has been exacerbated by the recent relative strength of the US dollar.

Will Jackson Hole make a difference?

The British pound against the Euro (EURGBP) also illustrates the fact that Sterling is out of favour (as Sterling is the quote currency in this pair, a rise in it represents a weaker pound). Here it is not so pronounced (we are looking at the daily, as opposed to the weekly, chart), and this reflects the Euro’s relative weakness of late against other counterparts.

We are now watching, and waiting, for a resumption of the dominant trend in these and related currency pairs, as it is our view that British economic fundamentals remain as sound as they ever were. Will the Bank of England representative at the Jackson Hole economic symposium, which gets into full swing today, have something to contribute that might have a bearing on all of this?

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