GBP looks in trouble again - Scotiabank

According to Scotiabank analysts, the GBP looks in trouble again following disappointing UK PMI data and the technical picture looks weak and bearish momentum is picking up.

Key Quotes

“Markets got hoodwinked by the PMI data—better Eurozone numbers helped lift the GBP to a little under 1.33 right ahead of the release of the worse-than-expected UK data, which has prompted a plunge to below 1.31 at writing.”

“The GBP looks in trouble again. The UK swap curve has eased a little more in response to this morning’s data, as BoE easing expectations rise. The curve has dropped a massive 40bps through the belly and long end over the past month as markets price in slow growth and low policy risks in the longer run.”

“GBPUSD short-term technicals: (bearish) The technical picture looks weak. After a narrow range yesterday, today’s larger trading band and (it seems safe to assume) the prospect of a lower close (effectively, a bearish outside range) may be enough to tip the GBP decisively out of its recent consolidation range.

“Bearish signals have been evident on the charts but the GBP has been subject to whippy (if shallow) counter-trend corrections. Bear trend momentum is picking up and a close under 1.3145/50 today should put spot under more pressure near-term for a retest of the 1.28 area at least. Fade minor GBP gains.”