Credit Agricole CIB FX Strategy Research notes that the GBP has been range-bound for most of the week, mainly on the back of strongly capped central-bank rate expectations.
“We expect this to remain the case in the short term. This is especially true as a great deal would need to happen in order for monetary policy expectations to change. Following the most recent BoE inflation report, it seems more likely that interest rates will be kept around the current levels for an extended period of time.
Having said that, it cannot be ruled out that incoming data surprises to the upside, and such prospects may well enable GBP to approach the higher end of this year’s trading range anew.
Therefore, all eyes will be on retail sales, inflation and labour data releases. Any indication of domestic demand conditions having held up better than feared and/or accelerating wage price developments would support such a view,” CACIB argues.
“Thus, we advise against selling the GBP around the current levels,” CACIB advises.
Source: Credit Agricole CIB Research
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