Pound Set for Longest Weekly Losing Run Versus Dollar Since 2015

The pound headed for its fourth consecutive weekly decline against the dollar, its longest losing streak since January 2015, as concerns over Brexit negotiations and tepid economic data weighed on the U.K. currency.

Sterling was also set for a fourth straight weekly drop versus the euro, having touched its weakest level since October on Aug. 23. The pound has had a rocky week as Brexit papers released by the U.K. government did little to ease doubts on whether it was enough to convince the European Union to allow trade talks to start as soon as October. With the U.K. yet to clarify how much it will pay the EU as a Brexit bill, markets will closely scrutinize talks next week to gauge how smooth the negotiations will be.

  • GBP/USD little changed at 1.2813, set for 0.4% decline this week. Cable has seen a steady drop since the week ended July 28, its longest such run since a six-week decline ended Jan. 23, 2015
    • Despite ‘doji’ Thursday session, denoting indecision, risks still point to 1.2749 Fibonacci line test; this is the last defense line that guards the June trough at 1.2589
    • Support 1.2760, June 26 high and resistance at 1.2837, Aug. 24 high
  • EUR/GBP falls 0.1% to 0.9209, having climbed to 0.9236 on Wednesday, its highest since Oct. 7
    • The euro set for a 0.8% advance on the week
    • Bears likely to stay absent until market comes closer to next meaningful resistance at 0.9415
  • Sterling faltered as stagnant investment and weak consumer spending figures signaled that the U.K. economy was fast losing steam
  • Analysts at Commonwealth bank of Australia, including Elias Haddad, said that the Bank of England will be in no rush to raise rates given the slowing economy
    • Also “as long as Brexit-related uncertainties persist, a lower GBP may be necessary to encourage greater foreign capital flows to the U.K. to finance the current-account deficit,” they write in a note to clients
    • CBA recommends selling GBP/CAD at current levels (~1.6030) with a target of 1.4900 and a stop loss at 1.6400