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Credit Agricole: Don't Buy GBP/USD At Current Levels

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by , 06-15-2015 at 12:08 PM (771 Views)
      
   
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It appears that well supported BoE rate expectations continue to keep currency downside limited from current levels. In that respect it must be noted that medium-term inflation expectations, as measured by 5Y forward breakeven rates, remain close to multiweek highs.

Unless forward looking indicators suggest moderating price developments it appears unlikely that the BoE will turn more cautious anytime soon.

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However, at the same time it must be considered that it will be difficult for rate expectations to rise more considerably unless incoming data makes a case of accelerating growth momentum.

From that angle next week’s main focus will be on labour data and retail sales. Considering the somewhat more muted business activity, it cannot be excluded that jobs growth weakened in April.

Elsewhere, we believe that the Fed remains on track to considering higher rates in September.

As a result of the above outlined conditions we advise against buying GBP/USD around current levels.

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