Shaun Osborne, Chief FX Strategist at Scotiabank, recommended fading the strength in Cable in the near term.
“Grounds for softness reside in the mounting political problems for PM May, with events undermining her authority just as the government restarts Brexit talks. EU forecasts suggest that UK economic growth will slow in 2018 (to 1.3%, from 1.8% this year), even if the UK’s trade relationship with the EU remains unchanged”.
“Sterling looks a little heavy on the session and remains prone to more softness. We note that the market remains capped under key resistance in the 1.32 area and while immediate downside risks were not realized following yesterday’s minor double top formation, the pound has struggled to recover. Intraday price action is bearish and the pound continues to flirt with major, weekly support around 1.3095. Look to fade GBP rallies”.
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