Tim Riddell, Research Analyst at Westpac, suggests that the post Conservative Party conference, fleshing out of policy, notably on Brexit and the budget deficit, will be critical for market sentiment towards GBP in the coming month.
“Recent BoE speeches have highlighted GBP’s fall as an additional leg within the Bank’s accommodative stance. Although the absence of an immediate collapse in confidence has meant that current data have remained relatively firm and push the possibility of further accommodation to one side, forecasts for 2017 underscore the risks of Brexit uncertainty on investment intentions. Trade data may show only minor Brexit impacts but its path into 2017 will be of increasing importance.
Risks of a squeeze are always present. However, a break above 1.2925 is needed to reduce the likely focus of the market on various technical targets in the 1.2450-00 area.”