GBP/USD Snaps Back Amid Growing Rift At BoE; Bearish Sequence Intact

Video length: 00:43:48

 

The British Pound snapped back from a fresh monthly low of 1.2589 as Bank of England (BoE) Chief Economist Andrew Haldane argued the central bank should normalize monetary policy ‘well ahead of current market expectations,’ but the near-term outlook for GBP/USD remains tilted to the downside as it extends the bearish sequence from earlier this week.

The growing rift within the BoE may tame the recent weakness in the pound-dollar exchange rate as Mr. Haldane argues it ‘would be prudent’ to remove the record-low interest rate in the second-half of 2017, and it seems as though there will be a greater dissent at the next policy meeting on August 3 especially as Governor Mark Carney remains in no rush to move away from the highly accommodative policy stance. With that said, the growing uncertainties surrounding monetary and fiscal policy may continue to sap the appeal of Sterling, with GBP/USD at risk of giving back the relief rally from earlier this year as the Federal Open Market Committee (FOMC) appears to be on course to gradually reduce the balance sheet over the coming months.

GBP/USD Daily

Chart – Created Using Trading View

• Failure to test the 200-Day SMA (1.2570) may keep GBP/USD afloat, with the Relative Strength Index (RSI) highlighting the risk for a near-term consolidation as the oscillator appears to be turning around ahead of oversold territory; broader outlook remains tilted to the downside as the momentum indicator preserves the bearish formation carried over from the previous month.
• Nevertheless, recent price action keeps the downside targets on the radar as the pound-dollar exchange rate preserves the series of lower highs & lows from earlier this week, with a break below the 200-Day SMA opening up the next region of interest around 1.2460 (61.8% expansion) to 1.2490 (38.2% retracement).