GBP Price Outlook: Pound Sterling Eyes PMIs & BoE Inflation

POUND STERLING OUTLOOK – GBP/USD, GBP/JPY, EUR/GBP: UK PMI DATA & BANK OF ENGLAND INFLATION REPORT ON DECK

• Pound Sterling bulls take a breather headed into an expected BoE inflation report release
• GBP implied volatility readings have ticked higher over recent trading sessions
• The British Pound could also eye an update to UK PMI data as well as upcoming Brexit talks

The Pound Sterling might drift into forex traders’ crosshairs later this week owing to potential for heightened currency volatility across GBP price action. This comes amid rising measures of implied volatility for the British Pound headed into the release of updated UK PMI data and an expected monetary policy update from the Bank of England.

BRITISH POUND IN FOCUS WITH UK PMI DATA & BOE MONETARY POLICY UPDATE ON DECK

Chart Source: DailyFX Economic Calendar

Pound Sterling bulls have started to pull back from a multi-month high after staging a remarkable rally throughout July. In fact, the British Pound Currency Index, a basket of major currency pairs helping gauge broader GBP performance, posted a solid 5.5% gain last month, but GBP price action is down almost a full percentage point on balance since its July 31 swing high.

GBP PRICE OUTLOOK – POUND STERLING IMPLIED VOLATILITY TRADING RANGES (1-WEEK)

Perhaps a recent rise in uncertainty surrounding this week’s release of leading UK economic data, like Markit PMIs, in addition to the expected BoE decision and inflation report, could explain the latest stretch of Pound Sterling sluggishness.

This is suggested by one-week implied volatility readings taken for GBP/USD, GBP/JPY and EUR/GBP as of last Friday’s close, which have churned higher over preceding sessions and now perched notably above their respective 20-day moving averages. Statistically speaking, an options-implied trading range of technical support and resistance is estimated to contain spot price action 68% of the time for the given duration.

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight