It turned into a rough day for cable and there could be more pain to come
GBP/USD down 85 pips on the day
The story in markets today is really the US dollar and its broad gains but those moves have put some important support levels into play.
One is in cable as it flirts with the May 31 low of 1.2955. There's about 40 pips of breathing room that remains but I think it will be the USD side that determines which way it goes, with the Fed on Wednesday as the main catalyst.
The other catalyst this week has been disappoint UK data. The numbers were roundly poor and while that may be Brexit-related, at some point it will be time for UK politicians to set about getting the economy moving. Unfortunately, that's still months away at best.
For now this chart is looking ominous but it all hinges on what happens over the next couple weeks with the Fed and China trade war. If the trade war deteriorates, I think the pound can do well, even in a time of risk aversion. As for the UK leadership, I think that party unity is the only factor that really matters and I'm not optimistic.
On the UK economic calendar next week :
- CPI Wednesday
- Retail sales Thursday
- BOE Thursday