The Pound Sterling is presently weak, showing a decline of 0.3% against the US Dollar. It is underperforming compared to most G10 currencies, with the exception of the Swiss Franc.<\/p>\n
Recent preliminary PMIs have exerted pressure on the pound, particularly due to a softer services PMI of 51.2 compared to an expected 52.9. The manufacturing PMI offered a slight surprise at 48.2, higher than the anticipated 48.0.<\/p>\n
The CBI sentiment figures met market expectations. Attention turns to Friday\u2019s retail sales, considered a key event for the week.<\/p>\n
Upcoming data is unlikely to influence the Bank of England’s decision on its August 7 policy meeting, where a rate hold is anticipated. Market expectations suggest one more 25 basis point cut by the end of the year.<\/p>\n
The multi-month bull trend seems to be losing momentum. The Relative Strength Index is close to neutral at 50, with the recent pullback finding support around the 50-day moving average of 1.3529. A near-term range is expected between the 1.3500 support and 1.3580 resistance levels.<\/p>\n
Given the recent softness, we see the pound’s immediate path as limited. The slowdown in the services sector, which accounts for around 80% of the UK’s economic output, is a significant headwind that outweighs the minor beat in manufacturing. This suggests that any strength in the Sterling will likely be met with selling pressure.<\/p>\n
We believe the current environment is ideal for selling volatility rather than taking a strong directional view. With the currency expected to be caught in a tight range, strategies like selling strangles or iron condors could be profitable. Implied volatility on Sterling options has been trending lower, and we anticipate this will continue in the lead-up to the central bank meeting.<\/p>\n
The upcoming retail sales report is a critical data point that could break the deadlock. After a strong 2.9% rebound in retail sales volumes in May 2024, a poor figure for June would amplify recession fears and could push the pound decisively below its current support. We will be positioned to take advantage of any spike in volatility around that release.<\/p>\n
Looking further ahead, the market is currently pricing in about a 70% chance of an interest rate cut by the Bank of England’s November meeting. Historically, a currency weakens when its central bank is leaning towards easing while others remain on hold. This fundamental backdrop supports a bearish to neutral stance on the pound for the medium term.<\/p>\n
Our strategy is to use the technical levels as a guide for options positioning. We will consider selling put options near the 1.3500 support level, collecting premium on the expectation it will hold in the short term. Conversely, we view the 1.3580 resistance as an attractive level to sell call options against.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Pound weakens amid soft PMIs; market eyes retail sales and anticipates BoE rate hold in August.<\/p>\n","protected":false},"author":62,"featured_media":17035,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-27179","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t