Sterling slides after Carney’s concerns
GBP/USD has taken a tumble again after Mark Carney warned the UK could slip into a 1930’s style of deflation. The rate of inflation in the UK is at a record low of 0.3%, and Mr Carney has warned that it could swing to negative territory. The UK’s largest trading partner is the eurozone – which is already encountering deflation – and weak demand from continental Europe is weighing on the British economy.
The currency pair has been in a downward trend for the past two weeks, and we are not seeing any sign of this trend changing. The only economic data we are expecting from the UK today is the construction output at 9.30am (London time). The market is expecting a reading of 1.4%, and we will see short-term selling if estimates are missed.
The $1.49 level is acting as resistance and the support at $1.48 is the downside target. GBP/USD is oversold on a daily basis and this may lead to a short-term pullback, a move above $1.49 will make the important level of $1.50 the target.