Trade Idea: LONG GBPUSD
Trade Recommendation: LONG GBPUSD (CMP 1.2761), TP 1.2885 & SL 1.2685
Introduction: Currently the GBPUSD is trading around 1.2761 levels. After touching 1.3044 level on 17th July, GBPUSD has been in a secondary downtrend and made a low of 1.2665 on 8th Aug. Since then, it has recovered to 1.276 levels. We believe that GBPUSD’s primary uptrend is still intact. The current secondary downtrend of last 3 weeks has more to do with carry trade unwinds than any fundamental change in the UK interest rate outlook. To us the 25-bps cut on 1st Aug by BOE was an insurance rate cut and now we don’t believe any rate cut before Nov meeting of BOE. Our view flows from the fact that UK service inflation is still high compared to other DMs. The upcoming batch of UK data will likely keep the Bank of England cautious about how quickly it can cut interest rates this year. While labor market data will likely show pay pressure moderating and the unemployment rate rising, headline inflation is set to move back above the 2% target with a strong Q2 GDP print.
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