GBP/USD drops further to 1.3890, but secures weekly gains
- Dollar gains momentum late on Friday and trims weekly losses.
- Cable heads for biggest weekly gain since May.
- Next week's key events: NFP and Bank of England meeting.
The GBP/USD failed to hold to gains on Friday and tumbled to 1.3890, reaching the lowest levels since Wednesday. Despite the decline, cable is about to post the biggest weekly gain since early May, boosted by a weaker US dollar across the board.
The greenback gained momentum late on Friday, into the London fix and trimmed weekly losses. The dollar rose even as US yields dropped. Economic data from the US did not surprise market participants. The relevant report was the PCE Core index that rose 0.4% in June, below the 0.6% of market consensus.
GBP/USD is hovering around 1.3900/10, at the same level of the 20-week simple moving average. The failure to break above and hold could show signs of some exhaustion on the upside, favoring a correction. The 1.3730 area emerges again as a relevant support. A firm break above 1.4000 next week, should clear the way to more gains.
From the Fed to BoE and NFP
The US dollar did not benefit from FOMC events. From Wednesday until late on Friday, it fell across the board. Next week, the key report will be the Nonfarm Payroll report. “Payrolls probably surged again in July, with the pace up a bit from the +850k in June. Some acceleration in the private sector is suggested by the Homebase data, while government payrolls probably benefited from favorable seasonal adjustments. We forecast another 0.3% m/m rise in average hourly earnings. The 12-month change is likely to rise again to 3.8% from 3.6% in June”, wrote analysts at TD Securities.
In the UK, attention continues to be on COVID-19 developments. If cases accelerate, it could hurt market optimism on the economic recovery. Next week, the Bank of England will meet. No change in monetary policy is expected. “We have become more confident in our bullish GBP outlook. While there is a risk that the BoE could disappoint hawkish expectations next week, any GBP weakness should be temporary”, mentioned MUFG Bank analysts.
Technical levels
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
