GBPUSD:
The pound remains under pressure as the Bank of England maintains a more “dovish” tone amid a slowing economy: June GDP grew by only 0.2% q/q and inflation dropped below 2.4% y/y, cooling discussions of further policy tightening. Simultaneously, the Fed is signaling caution in cutting rates, keeping the yield on 10-year Treasuries above 4.20% and boosting demand for the dollar.
Political risk also undermines sterling: upcoming snap elections and disagreements within the government over fiscal strategy are raising risk premiums on UK assets. Weak July services PMI (52.1 vs. the expected 53.0) only underscores that the corporate sector is feeling the pressure of high credit rates and declining consumer demand.
As a result, the US–UK yield spread is widening, and net speculative positions on the pound have turned negative. Until key US PCE data and the UK GDP revision are published, the market may test support at 1.34, remaining in a downward channel.
Trade recommendation: SELL 1.3490, SL 1.3510, TP 1.3400
Origin: FreshForex
