GBP/USD: outlook for October 17-21
In line with expectations, British pound remained under pressure versus the greenback. British currency hit a record low against an index of trade-weighted currencies on Tuesday and government borrowing costs have jumped in recent weeks.
The market has calmed down a bit once Prime Minister Theresa May agreed to “full and transparent debate” on the government’s negotiating strategy in parliament before talks with the European Union begin. This helped to ease worries that May places immigration policy above the nation’s access to the EU market.
Next week the UK will release inflation figures on Tuesday. Lower pound should lead to an increase in prices, although it remains to be seen when this increase becomes reflected in inflation data. The Bank of England’s Governor Mark Carney said he was willing to allow inflation to run above the central bank's 2% target in order to help employment and allow Britain's economy to grow. Earlier the regulator signaled it is likely to cut interest rates below historic minimum of 0.25% in order to help the economy cope with the shock of the Brexit vote. As a result, despite the pound’s weakness traders may still expect the regulator to ease policy at the next meeting on November 3.
Also watch the UK labor market figures on Wednesday, retail sales on Thursday and public sector net borrowing on Friday.
GBP/USD is on the bears’ territory as long as it’s trading below 1.2465/1.2500.Support is at 1.2100 and 1.1985.