What’s happening to the Pound right now?

Posted Thursday, August 25, 2016 by
Skerdian Meta • 2 min read

The GBP has lost nearly two dozens of pips after the Brexit referendum and it has been on the back foot since then.That´s a normal reaction by the forex market because an old chapter is closed for the UK and a new one is oppening with lots of hardhip and uncertainties ahead.

The economic data collected from business in July was really awful, with the UK construction, services and the manufacturing sectors slipping into contaction. The businesses tend to predict the near/mid term future of the business conditions and the Brexit vote made them much more wary of the future. So, they restrained themselves from investing in July and in my opinion they will continue to do so in the comming months years. Therefore, the GBP has rightfully declined.

The consumer sentiment on the other hand is a different thing. People on the street cannot really feel the Brexit effect at the moment, so they continue spending as before. The retail sales numbers for July showed a nice pickup and with the weakened GBP the inflation is picking up as well. After all, life goes on, people won´t go hiding in bunkers. So, we can say that the consumer side is still strong. 

Is this uptrend of the last two weeks running out of stem? 

So, don´t scratch your head when you see GBP/USD gain about 400 pips in the last two weeks or so. The forex market is at that phase right now where it is doubting whether Brexit is really that fatal for the economy of the UK. The very short term market sentiment is not that bearish anymore and that´s what´s given the GBP a lift. But the 50 moving averge on the daily forex chart around the 1.3 level will be a tough nut to crack. 1.3360-70 and bove that 1.3470-1.3500 are the ultimate resistance levels in near term. 



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