Cable has found a footing after three straight down days, which yesterday culminated in a new 10-day low at 1.2557. The pair has since taken root in the 1.2570-85. EURGBP has similarly come to a directional halt below the six-day high seen yesterday at 0.8990, which is just 2 pips short of the six-month peak that was seen last week. This week’s June PMI survey data, which saw the June composite PMI fall sharply to 49.2 from May’s 50.7, painted a picture of a stagnating economy, brought on by both prolonged Brexit-related uncertainty and slowing economic activity in continental Europe. In the UK, as in all high income countries, the service industries account for 80% of total UK economic output and 83% of jobs. As the authors of yesterdays report stated “The latest downturn has followed a gradual deterioration in demand over the past year as Brexit-related uncertainty has increasingly exacerbated the impact of a broader global economic slowdown,” Chris Williamson, chief business economist at IHS Markit.
As for Brexit, the news flow has remained quiet in terms of substantive developments. That will change as soon as the new prime minister, most likely no-deal-Brexit-if-necessary Boris Johnson, takes up the reigns (which should be by mid-month). Expectations are that the that the UK currency has been trading with a 10-15% trade-weighted Brexit discount since the vote to leave the EU in June 2016, and there is no great scope for this to reverse anytime soon. GBPCHF and GBPCAD have both been under the 20-day moving average for 40 consecutive trading days.
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Head Market Analyst
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