Pound exchange rate, GBP: Further weakness looks likely

Last Updated on Monday, 04 July 2011 10:03 Written by Sam Coventry Monday, 04 July 2011 10:01

We take a look at the prospects for the British Pound Sterling in the week ahead.

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The GBP to EUR rate is 0.242% higher with 1 GBP = 1.1098 EUR.

The GBP to USD rate is 0.374% higher with 1 GBP = 1.6126 USD.

Barclays Capital comment on the outlook for the British Pound Sterling:

"Unlike in the euro area, the Bank of England's monetary policy decision is unlikely to matter for GBP this week. The minutes will be important, but these are not published until 20 July.

"Rather, what will be key are the remaining PMI prints, as well as the industrial and manufacturing output data. Our economists are below-consensus throughout. As a result, GBP is likely to weaken further as the market's expectation for further QE rises. Our technical colleagues expect GBP/USD to dip back towards 1.5970 unless it breaks decisively above 1.6150. In this case they would look for it to push higher to 1.6260.
 
"The one note of caution is that manufacturing and industrial output data for May are unusually hard to forecast because of the extra bank holiday (thanks to the royal wedding) and unseasonably good weather in April (and hence less heating), which weighed on the April outturns. Should the data surprise to the upside, we recommend fading the rally, unless it has been preceded by a large positive surprise to the service sector PMI."