The British manufacturing sector was significantly affected by the slowdown in the global economy and the uncertainty of Brexit future, which added to the pressure on the pound. Therefore, the GBP/USD's bearish momentum continued despite investor optimism, albeit tentatively, towards the global trade war, as both the U.S President Trump and the Chinese President Xi agreed to renew negotiations to avoid imposing more tariffs on each other's imports. The pair remained stable around the 1.2625 support level and is likely to test stronger bearish levels.
Mark Carney was frank and confirmed what he had said earlier during his testimony on the inflation report in Britain, where he suspended any change in the Bank of England’s policy on the future of the Brexit, as leaving the EU without an agreement would be catastrophic for the British economy and the pound sterling. The bank has been moving towards a gradual and limited rate hike.
July 23rd is the date to announce the new UK Prime Minister, with indications confirm the former foreign minister's victory in taking over the post after Teresa Mae, a well-known hostile figure in dealing with Europe, and things could develop with him to an exit from the EU without agreement. The pair's recent rebound has been supported by continued pressure on the dollar since the Federal Reserve confirmed the possibility of a US rate cut as soon as possible if the US economy continues to slow down.
The Bank of England is a major economy central bank and the only one that is looking to raise the interest rate at the moment, but the uncertainty of Brexit future is preventing them from doing that. The bank has kept the interest rate and asset purchase plans unchanged, stressing that the rate hike will depend on Brexit.
The pair's performance confirms what we always recommend; to sell from every bullish level. Brexit fears will remain a negative factor for any pair gains. The dollar is facing a setback supported by hinting that the US interest rate could be cut soon. Since the UK vote to exit the EU, we have always recommended selling the Pound against other major currencies as Brexit will not end overnight, and not easily, as some believe, so as not to spread the infection among the rest of the EU. Pound gains will remain good opportunities to sell.
Brexit developments from time to time will continue to contribute to the volatility of the pair's performance.
Technically: GBP / USD settling again below the 1.3000 level still support the bearish correction for the pair despite the recent rebound, and support levels are still at 1.2640, 1.2580 and 1.2445 respectively, closer to the pair's performance while confirming the strength of the bearish trend. On the upside, the bullish correction opportunity will not be stronger without settling above the 1.3000 resistance. I still prefer selling the pair from every ascending level. Its gains may be in the wind for any negative Brexit development.
On the economic data front, the economic calendar today will focus on the UK PMI for the construction sector. There are no important US data today.
