Ahead of key economic events on both sides of the Atlantic later in the week, position adjustment is likely to dominate on Monday. Overall, there is likely to be further near-term GBP/USD resistance on approach to the 1.3150 area.
US second-quarter GDP growth was close to consensus forecasts with 2.6% growth as consumer spending rebounded. The dollar was unable to gain support from the data, especially as there were low inflation readings within the data.
As the US currency came under renewed selling pressure with EUR/USD testing 30-month highs, GBP/USD moved back above the 1.3100 level.
The latest CFTC data recorded a fresh increase in Sterling short positions to a 3-week high, increasing the potential for a renewed round of short covering, especially with GBP/USD trading above the 1.3000 level.
Economic data was relatively sparse with the Lloyds Bank business barometer index holding at 6-month lows for July with fragile underlying confidence.
There was uncertainty surrounding Thursday’s Bank of England monetary policy announcement even with expectations that interest rates would be left on hold at 0.50%. Even if rates are left on hold, the inflation report and policy summary could have important implications for policy expectations.
UK consumer lending data was stronger than expected for June with overall net lending increasing £5.6bn from a revised £5.7bn the previous month. The suggested that consumers were still willing to increase borrowing despite concerns surrounding a decline in real incomes. Increased lending will maintain expectations of firm spending and could make the Bank of England more willing to raise interest rates.
There was no immediate positive impact on Sterling with GBP/USD drifting towards the 1.3100 area.
The US economic data will be watched closely on Monday, although month-end position adjustment is likely to be the more important short-term market influence on the pair with the risk of notably choppy trading into the London fix.