GBP/USD to fall off 1.30?
Cable finds dip demand after earlier tumble
Dip buyers are back in to give GBPUSD some support 9 Aug 2016
The pound took a hit earlier as bearish comments from the BOE 's McCafferty helped to knock it lower.
1.2970-80 has been a line in the sand for a while now and so it's proved again with a low of 1.2978 before now testing 1.3000 on a rebound.
It's not broken back up through yet though and the pound remains delicately poised for further attack as we wait for European desks to shuffle into action. If we do get back through then look for more sellers into 1.3020 with larger interest then between 1.3045-50.
EURGBP has been underpinned throughout the Asia having sustained a move above 0.8500 and this has helped undermine the pound. Support/demand now at 0.8520 then 0.8500 with offers/res into 0.8550
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The BOE laid down its massive hand and walloped the pound. Is there room for more falls? Here are opinions from Citi and BNP Paribas:
GBP/USD En-Route To Break Below 1.30 After BoE Clears High Bar – BNPP
The Bank of England Monetary Policy Committee (BoE MPC) voted 9-0 to cut the base rate from 0.50% to 0.25% and voted 6-3 to increase the asset purchase target by GBP 60bn to 435bn over the next six months. It also announced purchases of GBP 10bn of non-financial investment grade corporate bonds and said the majority of the MPC saw rates near zero by the year end.
The BoE, therefore, delivered on market expectations for rate cuts, over-delivered on quantitative easing, both regarding size, and composition, and sent a more aggressive than expected signal on future rate cuts.
GBPUSD has weakened in line with our view and we still see scope for further downside in the pair.
Our BNP Paribas STEER™ model signals 2y swap rates are the key driver of GBPUSD and, while UK rates are unlikely to fall much further, we see considerable scope for US rates to rise and push down GBPUSD. We still target the pair below 1.30 by the end of Q3.
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