Cable falls to a low of 1.2088 before moving a little higher again now
The pair fell to test near-term support around 1.2100-02 once again before finding a bit of a reprieve as the UK economy contracted in Q2 for the first time since 2012.
I don’t think markets are too surprised by the headlines to be honest. I’ve been saying since last month that it would take a miracle June month for the UK economy to escape negative growth in Q2 and alas, there was no miracle.
So, what’s next for the pound?
All this does is just reaffirm the fact that Brexit uncertainty is spelling danger for the economy but if anything else, this creates more negative headwinds for the currency as it pushes the BOE to lean more towards easing monetary policy to bolster the economy.
As we move towards September and a renewed Brexit focus in the coming weeks, this will just pile on more misery for the pound amid growing concerns of a no-deal Brexit.
For cable, watch out for support around 1.2080-00 in the short-term. If that gives way, things could get ugly towards a move to 1.2000 and below.