GBP on a shaky ground? - Rabobank

Sandeep Kanihama FXStreet Contributor

Jane Foley, senior FX strategist at Rabobank, points out that GBP/USD pair is trading close to its lowest levels for the year as the pound is clearly vulnerable against a backdrop of political uncertainty and a deteriorating UK economic environment.

Key Quotes

“Towards the end of the month the results of the Tory Party leadership election should bring further clues as to the risks of a no deal Brexit. We see risk that GBP/USD will dip to the 1.23 area on a 3 month view on the back of fears of a no deal Brexit. Our assumption of a recovery to the 1.30 area in 6 months assumes that Brexit will be delayed into next year.”

“Politics is set to remain the main driver for the pound in the coming months. That said, the weakening UK economic backdrop is likely to increase GBP’s vulnerability. Last week’s releases of disappointing PMI data for June highlighted the downward pressures on the UK economy. Having been lifted by stockpiling in UK ahead of the original March Brexit date, there is growing evidence that economic activity is slowing as these are pared back. The results of a Bloomberg survey provides a consensus forecasts for a modest -0.1% q/q contraction in UK GDP in Q2 and a steady BoE policy rate until 2021.”

“Although the BoE’s official guidance suggests that rates could go either way dependent on Brexit, BoE Governor Carney has appeared to soften his policy stance recently against the backdrop of trade wars and slowing global growth. Tomorrow’s releases of May monthly GDP in addition to production and trade data should help clarify the relative strength of the UK economy.”

“On the charts a break through the December low close to GBP/USD1.2478 would target the 1.2351 area which is the April 2017 low.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

AUD/USD bounces back toward 0.6950 on fresh USD supply

AUD/USD bounces back toward 0.6950 in the Asian session on Friday. The US Dollar retreats from 17-month highs as traders take profits off the table ahead of the all-important US Nonfarm Payrolls report. Meanwhile, the Australian Dollar draws support from reviving expectations of a November interest rate hike amid elevated global yields and inflation risks.

USD/JPY struggles near 158.00 as USD retreats ahead of NFP

USD/JPY is struggling for fresh impetus near 158.00, moving away from the top end of its weekly range in the Asian session on Friday, after hotter-than-expected Tokyo CPI and amid a broad US Dollar retreat. Traders reposition themselves ahead of US Nonfarm Payrolls.

Gold fades the earlier optimism; back below $4,200

Gold could not sustain the post-NFP bull run past the $4,200 mark per troy ounce, receding toward the $4,180 region at the end of the week. The precious metal’s inconclusive price action comes amid fresh selling pressure hurting the US Dollar as investors assess the latest NFP data.

Week ahead: Fed minutes in the spotlight amid bond market rout

The first full week of October and the final quarter of the year get underway with little fanfare in terms of the economic agenda. But far from being short on excitement, the coming week will test market nerves, as government bond yields continue to soar on growing worries that the energy crisis will only get worse, fuelling inflation.

CFTC Report: Speculators turn more defensive as Oil exposure falls

The week in one sentence: During the week leading up to September 29, long positions in crude oil were significantly reduced, while short positions in the Canadian Dollar went up. In addition, the positioning of the Australian Dollar and the Japanese Yen declined, while Coffee buying stood out against a more general background of defensiveness.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082. The decline reflects a powerful combination of US Dollar strength, geopolitical uncertainty and renewed concerns about Europe's exposure to higher energy prices.