GBP Down After Carney’s Remarks, Riksbank Decides on Policy

Risk Appetite Softens, Pound Slides as Carney Sounds Cautious

The dollar traded lower against most of the other G10 currencies on Tuesday and during the Asian morning Wednesday. It gained only against GBP, while it was found virtually unchanged versus EUR and NZD. The main winner was JPY, with AUD taking the second place, but well behind.

GBP/JPY — Technical Outlook

From the start of this week, GBP/JPY keeps on drifting lower, trading now below a short-term tentative downside resistance line taken from the high of June 11 th. We can see that today, the pair stopped its freefall near the 135.37 hurdle, which held the rate from moving lower on June 18 th. Given that the pair is quite extended to the downside already, especially on the shorter timeframes, we may see a small correction back up and then another leg of selling, which is why we will stay cautiously-bearish for now.

Will the Riksbank Push Back its Forward Guidance?

Following the RBA decision yesterday, today the central bank torch will be passed to the Riksbank. At its latest meeting back in April, the world’s oldest central bank kept its repo rate unchanged at -0.25% and decided to push back the timing of when it expects interest rates to rise further, noting that this could happen “towards the end of the year or at the beginning of next year”. Since that meeting, Swedish data were mainly on the bright side, with GDP slowing by less than anticipated in Q1 and inflation accelerating. It is worth mentioning that the core CPIF rate, which excludes the volatile items of energy, ticked up to +1.6% yoy in April from +1.5% in March, and then rose to +1.7% in May.

USD/SEK — Technical Outlook

After reversing to the downside in the end of May, USD/SEK has been trending lower, with occasional corrections to the upside. The pair still remains below a short-term downwards moving resistance line taken from the high of May 23 rd. That said, after another strong slide at the end of June, the rate found good support near the 9.2469 zone, from which it rebounded last week. From Monday, USD/SEK started recovering some of its losses made during the second half of June, but got held near a strong resistance barrier, at 9.3715, which is the low of June 7 th. We believe that the pair could continue feeling the bear-pressure and could move lower once again, hence why we will stay somewhat bearish, at least for now.

As for the Rest of Today’s Events

During the European day, we get the final services and composite PMIs for June from the Euro-area nations of which we got the manufacturing prints on Monday. As we already noted, the UK services PMI for the month is also due to be released.

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