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The pound has been surfing on a positive wave against the US dollar since July 26th, mostly due to a global sell-off in the greenback rather than better appetite for the pound itself. Cable cleared the 1.33 resistance against the US dollar in New York, yet failed to extend gains above 1.3370.
The final PMI print confirmed the contraction in the UK’s services sector following the UK’s decision to exit the European Union.
In the wake of Super Thursday, we could expect a retreat in long GBP positions, the pair could retrace towards the 1.3266 / 1.3225 area (Fibonacci 50% level on July 15 – 26 decline / 100-hour moving average) and find support at 1.3180, the 200-hour moving average.
The FTSE opened upbeat in London yet rapidly reversed gains. Energy stocks remain under pressure as WTI consolidates losses below the $40 level.
Furthermore, the appetite in the banking sector could remain short-lived. Quarterly profits for HSBC (+3.47%) fell 45% according to latest results. The slow economic growth in Britain and Hong Kong hit profits, at a time when the outlook for UK banks remain full of uncertainties following the Brexit vote. HSBC reversed morning losses in Hong Kong after the bank announced a share buyback plan worth $2.5bn for the second half of 2016. Despite a positive open in London, the mismatch between the underlying results and the stock’s price recent performance could attract sellers above the 500p level.