During the past week GBP/USD was trading in range between 1.5730 and 1.5600. On the one hand, British currency got support from the economic background. However, the bulls lacked strength for considerable growth.
The Bank of England’s meeting minutes showed that 2 members of the Monetary Policy Committee keep calling for a rate hike. The inflation data didn’t worsen, but the level is still far from target. This means that it’s still a long time until the Bank of England increases rates. As a result, pound has little chances to strengthen.
Moreover, political battles over Britain’s membership in the EU are starting to affect GBP. The UK Independence Party won a second seat in the British parliament after a by-election in southern England.
We expect the downtrend to continue. Our strategy is to sell on rallies. In case of the pullbacks up which are possible if the US data disappoints, the next area to go short will be at 1.5770. The break below 1.5600 will cause a decline to 1.5500 and 1.5400.
On Wednesday the UK will release the revised reading of the Q3 GDP. The initial estimate of the economic growth was 0.7%.