GBP still constructive. Keep buying dips according to Credit Agricole

Cites labour market conditions. Limited change in BOE rate expectations

Credit Agricole is encouraging buying dips in the GBPUSD despite the worse than expected inflation data.

In their analysis reported by eFX, they say that labour market conditions improve further in August. The unemployment rate dropped to 7 years low levels.

Despite the weaker inflation data this week, the characterizing has driven by external factors such as capped commodity price developments. They point out that the medium-term inflation expectations have been well supported at 3%.

As a result, they expect that investors expectations for BOE policy to not deviate lower from current levels and this in turn should be supportive to the GBPUSD.

Next week, Public Sector net borrowing will also be release on Wednesday with expectations for 9.6B from 11.3B last month. The most important release will be retail sales on Thursday. The expectations ex Auto Fuel to show a MoM gain of 0.4% and YoY of 4.7%. Including Auto Fuel, the MoM is expected to rise by 0.4% and 4.8% respectively.