The Sterling has started the week buying 1.2721 US cents, 1.1167 Euro and 138.03 Japanese Yen at Mondays Sydney open. Last week’s ‘flash crash’ saw the pound fall across the board during Thursday’s trade, as fears of a global economic slowdown, particularly in China, forced investors into save haven currencies such as JPY and USD. Losses were short-lived however, after falling to its lowest levels since April 2017 on Thursday, Friday’s session saw the domestic unit surge against the greenback, rising 0.6% to touch 1.2722.
The resurgence came despite stronger than expected US jobs growth and comments from Fed Chair Jerome Powell regarding the central bank’s sensitivity to market concerns about a U.S. led economic slowdown. Although we did see a strong result in the service sector survey on Friday which aided the pound, we expect the domestic unit to remain under pressure as the effects of an uncertain Brexit situation are starting to be felt, notably in the housing market.
Looking to the week ahead, the first risk event for the pound comes on Wednesday as we have commentary from Bank of England Governor carney followed by GDP and manufacturing production numbers due out on Friday. The numbers will be closely watched by traders who are eager to gauge the magnitude of the Brexit uncertainty on the economy. We see the GBP/USD as being relatively well supported at 1.2655 and 1.2610 on the downside with upside moves expected to face selling pressure approaching technical resistance levels at 1.2745 before 1.2815.