Pound softens further in Asia

Boris Johnson wins vote

The pound traded lower from opening levels during the Asian morning, but failed to take out yesterday’s one-week low in the aftermath of Boris Johnson winning the Tory Party leadership race by a large margin. Today could be the fourth consecutive down-day in a row for GBP/USD, the longest stretch since mid-June. The next possible technical support level could be found at the downward-sloping trendline drawn from the May 23 low, which is about 1.2363 today. GBP/USD is currently trading at 1.2430.

GBP/USD Daily Chart

Source: OANDA fxTrade

UK gets a surprise growth upgrade

In its July World Economic Outlook, the IMF downgraded its global economic forecasts for this year and next by 0.1% from its April review. It now sees growth at 3.2% for 2019 and 3.5% for 2020. Downgrades were also made to China’s growth estimates by 0.1% for each year, and are now at 6.2% for this year and 6.0% for 2020.

In contrast, the IMF upgraded its growth forecast for the UK to 1.3% from 1.2%. However, that estimate is based on an assumption of an orderly Brexit followed by a gradual transition to the new era. The Fund named a no-deal Brexit as one of the key risks to both UK and global growth.

Flash PMIs top the agenda

It’s a day of flash PMI readings from Markit for July today, with most estimates suggesting a mild improvement from June. Germany’s manufacturing PMI is expected to increase to 45.2 from 45.0 with the reading for the Euro-zone probably held steady at 47.6, according to the latest survey of economists.

In the US session, the Markit manufacturing PMI is seen rising to 51.0 from 50.6. Aside from the PMI, we see US new home sales for June, which are expected to rise 6.0% m/m, a strong rebound from May’s 7.8% drop.