Sterling increasingly pressured towards new long-term lows
James Chen August 12, 2016 1:36 AM
<p>The Bank of England’s interest rate cut to a new record low of 0.25%, and other stimulus measures implemented by the UK central bank last […]</p>
The Bank of England’s interest rate cut to a new record low of 0.25%, and other stimulus measures implemented by the UK central bank last week in response to June’s Brexit decision, prompted even more pressure on sterling than had already plagued the struggling currency.
After last week’s rate cut, the British pound fell swiftly against its chief rivals – the US dollar, euro, and yen – prompting the pound to re-approach its recent long-term lows against these other major currencies.
As of this writing, GBP/USD has dropped below the key 1.3000 psychological level, which has opened the way for a further potential fall towards July’s post-Brexit 31-year low of 1.2795. Similarly, sterling has continued to fall precipitously against the euro, as EUR/GBP rose further on Thursday to re-test July’s multi-year high of 0.8626.
Even more so than GBP/USD and EUR/GBP, however, the currency pair that has arguably been affected most severely in the post-Brexit environment has been GBP/JPY. From the exceptionally sharp Brexit-driven dive in late-June to the current slide since late-July, GBP/JPY has mostly shown a singular bearish bias that has been even stronger than many have anticipated. This has been due both to tremendous pressure on the pound as well as a consistently strong Japanese yen that was helped along initially by its status as a safe-haven currency during post-Brexit volatility.
GBP/JPY now appears likely to continue its robust downtrend that has been in place for more than a year. The currency pair has currently extended its recent slide to approach major support around the psychologically-significant 130.00 level, which is in the vicinity of July’s multi-year lows. A strong breakdown below 130.00 would result in a further extension of the year-long downtrend, with the next major downside target around the key 125.00 support level.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.