GBP/USD to retest the 1.3750 level if ECB strikes dovish tone – ING

GBP/USD holds steady near 1.3815-20 region. For the week ahead, cable is set to be capped and could challenge the 1.3750 mark in case of a dovish European Central Bank, economists at ING report.

A dovish ECB may possibly impact GBP/USD

“While we expect EUR/GBP to remain range-bound in the 0.85-0.86 area, the downside risks to EUR/USD next week means that GBP/USD should not gain much. If anything, the risks are skewed to GBP/USD re-testing the 1.3750 level if the ECB strikes a dovish tone. The 200-day moving average of 1.3690 should prove a strong support level on the downside.”

“We have seen a shift in the communication from some of the BoE officials with MPC member Saunders and Deputy Governor Ramsden both indicating that the need to taper asset purchases may come earlier than expected. However, the impact on GBP was limited, partly because the next step in the eventual policy normalisation process (rate hikes) remains still some way off.”

“Despite the increasing COVID-19 cases, the UK government will deliver the final part of the reopening/end of restrictions on 19 July.”

“On the domestic data front, the focus will be on June retail sales and July PMI manufacturing and services (both on Friday).”