Pound declines versus the dollar

After touching $1.68 yesterday, sterling has dropped back, hit by weaker UK construction output figures.

Yesterday’s Bank of England decision was one of the dampest of damp squibs – i.e. no change for the 33rd successive meeting. Construction output for February was released this morning, and saw a decline of 2.8% versus the expected drop of 1.3%.

Having seen $1.68, however briefly, the presumption is that we will eventually witness further gains in GBP/USD. However, the currency was sharply overbought earlier in the week, and we’re now witnessing the unwinding of that move.

In the short term I expect to see support enter the fray around $1.6720, with the rising 100-hour moving average hovering here as well. The 200-hour is also continuing to rise, which would suggest support close to $1.67 if there is a sustained bout of risk aversion in the coming week.

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