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The pound fell back below $1.30000 for the first time since July 12, extending the losses from the past four consecutive days to almost 400 pips after policy maker Ian McCafferty told The Times that more easing would be required following the Bank of England’s decision to cut rate last week.
Ian McCafferty, who is widely considered as the only “hawk” in nine-person BOE committee, expressed a dovish tone on Tuesday, stating that the “Central Bank’s benchmark rate can be cut further, closer to zero, and quantitative easing can be stepped up”. One of the four external members, he had earlier opposed raising the target for quantitative easing via increased government bond purchases in the latest BOE meeting on Friday.
Meanwhile, the U.K. Office for National Statistics reported on Tuesday that manufacturing output fell 0.3% in June, worse than the consensus forecast for an unchanged reading. The U.K.’s trade deficit widened in July to 12.4 billion pounds ($16.2 billion) from 11.5 billion pounds, one month earlier, as imports rose faster than exports. According to HSBC, the pound needs to weaken substantially to prevent further deterioration in the U.K.’s current-account deficit. The U.K.’s largest bank by assets said that the pound could trade as low as $1.10 by the end of 2017.
Too many factors are weighting on the Sterling lately while the dollar’s appeal has been increasing in recent sessions as investors refocus on renewed hopes for a Federal Reserve interest-rate increase in 2016 after a solid U.S. July jobs report released last week. According to CME Group’s Fed Watch tool, the chance for a U.S. rate hike by December has surged to 40 percent compared with 30 percent before a better-than-expected nonfarm payrolls.
Fig: GBPUSD H4 Technical Chart
GBPUSD has broken through the lower end of the recent price range at 1.30715 and is still heading lower, pushing the market into oversold territory as the RSI (14) has fallen below the 30 threshold. The bear is dominating in the market as can be seen from the price action – the white candles(down candles) have long bodies while the black candles(up candled) closed near the opening prices. The short-term MA has penetrated the short-term MA from above, suggesting more downward pressure is about to be created for the pair.
Sell Stop at 1.29760, Take profit at 1.29600, Stop loss at 1.30000