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Will the British Pound Stop Its Downward Slide?

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British pound continues to slide

The British pound (FXB) depreciated by 1.66% against the US Dollar (UUP) for the week ending April 27. The pound (GBB) closed last week at 1.3780, compared to a close of 1.4004 for the week ending April 20. This is the second consecutive weekly loss for the British pound, as traders continued to react to the dovish statement from the Bank of England two weeks ago and last week’s softer GDP data accelerated the pound’s decline.

British equity markets (BWX) managed a fifth consecutive positive weekly close, reflecting the positive trend across global equity markets. The FTSE 100 index (EWU) was up 1.82% last week and closed at 7,502.21.

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Speculators decrease bullish positions

As per the latest “Commitment of Traders” (or COT) report, released on April 27 by the Chicago Futures Trading Commission (or CFTC), speculators decreased their overall bullish positions by 10,337 contracts last week. The total outstanding net long contracts decreased from 47,702 contracts to 37,305 contracts as of April 24. With the US dollar surging and the chance of a rate hike from Bank of England declining, pound bulls could take the backseat for the time being.

The week ahead for the British pound

Economic data from the United Kingdom is likely to have a limited impact on the pound. The economic calendar includes manufacturing, services, and construction PMIs, and any negative surprise should accelerate the pound’s fall. Apart from domestic data, the demand for the US dollar would be an important driving force for the pound’s price action.

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