The pound was the biggest underperformer on Tuesday, falling from 1.2810 to 1.2696, representing a 0.7% depreciation and its lowest level since mid-august. The risk of a no deal Brexit continues to hurt the domestic unit, with the overnight moves coming as ratings agency Standard & Poor noting overnight that the elevated risk of a no deal Brexit had accelerated enough to warrant it being considered in their ratings outlook for the UK economy. Markets were spooked by the agency forecasting a ‘modest recession’ if a no-deal Brexit came to fruition.
Tuesday’s weaker than expected GDP print out of the Eurozone was not enough for the Sterling to find support against the EUR, as the EUR/GBP cross rose from 0.8868 to touch intraday highs of 0.8938 before retreating slightly to consolidate around the 0.8925 handle. A strong performance from the Aussie dollar also saw AUD/GBP rise nearly 100 pips, touching highs of 0.5597.
As we have been alluding to all week, pound traders will be turning their attention to Thursday’s bank of England meeting. Whilst the central bank is expected to maintain their current monetary policy stance by keeping the cash rate on hold, the accompanying statement will be closely watched for any detail as to necessary conditions for a policy tightening scenario.
On the technical front, near term GBP/USD supports are evident it’s 2018 low of 1.2660 with any topside moves expected to meet resistance on approach to 1.2750.