Pound Sterling to Remain "Vulnerable" over Next Few Days say Lloyds, Tech Studies vs. Euro + Dollar Confirm Fault-Lines

Lloyds On GBP vs. USD: “We could see renewed weakness come in”
Lloyds On EUR vs. GBP: “We see the risk of a higher low developing here”

Near-term direction in the British Pound could well be lower warns an analyst with Lloyds Bank’s Commercial Banking unit.

In a mid-week briefing to corporate clients from one of the UK's most well-known high-street lenders, analayst Robin Wilkin says he will be “re-focussing on GBP” as a combination of political issues for PM May, the next round of Brexit negotiations and technical set-ups suggest GBP can come back under pressure in the coming days”..

Pound Sterling has trended sideways against the Euro and US Dollar of late with one observer noting that the currency to be trading in a “diffuse” fashion. “In the end, the intraday swings in cable and in EUR/GBP were primarily USD and Euro moves rather than Sterling inspired price action,” says analyst Piet Lammens with KBC Markets in Brussels.

It would appear however that most analysts expect more discernible drivers to become apparent for Sterling, most notably the outcome of the latest round of Brexit negotiations between the UK and EU. Focus on Friday’s press conference with Michel Barnier and David Davis should be heightened and determine how the week ends for the UK currency.

Until then, technical considerations are expected to be of utmost importance with traders making decisions based on identifiable support and resistance zones.

“After bouncing back to mid-range, prices are finding good resistance in the 1.3180 region. Our momentum studies are suggesting that, while this region holds we could see renewed weakness come in,” says Wilkin with regards to price action in GBP/USD.

“Overall, we continue to view the current range between 1.3050 and 1.3350 as a consolidation phase ahead of a move towards the 1.2800 region,” adds the analyst.

The US Dollar has been dominant over recent days and as we note here, November has historically been a month within which the Dollar outperforms. Will November 2017 be the same?

Concerning Sterling’s prospects against the Euro, Wilkin observes:

“Prices have moved back to 0.8810-0.8780 support within the range. We see the risk of a higher low developing here for a move back towards the current range highs between 0.8725 and 0.9025.”

For those inclined to view the pair from the GBP to EUR angle, the 0.8810-0.8780 support referenced in Wilkin’s analysis gives us resistance in GBP/EUR at 1.1350-1.1390. There is therefore an identifiable risk that Sterling fades back to a range low at 1.1080.

So no major losses are envisaged, but a move towards recent lows appears to be the expectation with Lloyds.

At the time of writing the Pound-to-Euro exchange rate is at 1.1320, giving an EUR/GBP conversion of 0.8833.

The Pound-to-Dollar exchange rate is at 1.3137.

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