Pound Heads for Third Weekly Decline as U.K. Data Underwhelm
(Bloomberg) -- The pound was on track for its third weekly decline versus both the dollar and the euro as U.K. data failed to paint a brighter economic outlook for a nation embroiled in negotiations to exit the European Union.
While sterling found some initial support on higher-than-forecast retail sales figures on Thursday, an underlying trend showed that consumers were flagging. Similarly, while labor-market data this week showed a drop in the unemployment rate, wage growth still lagged behind inflation. The pound fell to a one-month low against the dollar on Aug. 16, one day after a report showed annual consumer prices rose less in July than expected. The data may portend slower second-quarter growth when the latest gross domestic product figures are released on Aug. 24.
- GBP/USD climbs 0.2% to 1.2888, paring its decline this week to 1%
- The pair is attempting to form base against 1.2848 Fibonacci support
- Support at 1.2848-42, 61.8% Fibonacci, Aug. 16 low; resistance at 1.2909, Aug. 17 high
- “GBP has looked more vulnerable recently and we expect additional weakness, notably against USD,” HSBC strategists, including Daragh Maher, write in a client note
- “The U.K. economic news continues to deteriorate and challenging politics could become a fashionable talking point again as an explanation for a more marked retreat in GBP”
- HSBC recommends selling GBP/USD with a target of 1.2510 and a stop loss at 1.3050
- EUR/GBP little changed at 0.9107, set for weekly gain of 0.2%, adding to a 1.5% advance in the previous two weeks
- The pair is approaching last meaningful resistance line that stands in the way of GBP ‘flash crash’ spike level at 0.9415
- Yield on 10-year gilts falls 1bp to 1.08%
- The pound could be driven by Brexit headlines next week. The U.K. will publish two papers on Monday with more expected in the following days, as it lays out positions in at least three different areas that it wants to negotiate with the EU