GBP/USD: outlook for July 11-17
British pound remained affected by the consequences of the Brexit vote. During the past week 3 British commercial property funds suspended trading, because too many investors wanted to exit the funds – this is a clear sign that the market players are nervous.
On Tuesday the Bank of England’s Governor Mark Carney will testify on inflation and the economic outlook before the Parliament's Treasury Committee. On Thursday there will be a meeting of British central bank and on Friday we’ll hear more comments from Carney.
Earlier Carney said that British economy might need additional monetary stimulus this summer. The consensus forecast is that British central bank will leave monetary policy unchanged in July assessing situation for a potential move in August. The market’ however, has largely priced in rate cuts in both July and in August as well as potential resumption of quantitative easing. As a result, the Bank of England has to deliver much easing to send the pound lower.
At the same time, taking into account the fact that GBP/USD collapsed below the Brexit vote lows and fell below the important 1.30, long positions remain too risky. One has to remember that Britain is going through unchartered waters, so pound may be technically drawn to 1.25.
Resistance is at 1.3120, 1,3300 and 1.3500 in the short term with the key longer-term obstacle at 1.3850. Support is at 1.1790 ahead of 1.2665.