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Pound still under influence of Brexit

Monday, Jul 11 2016
There were no data releases from the UK today. The BoE, which meets on Thursday, expects the economy to suffer a material slowdown because of the uncertainty caused by the Brexit vote. Chances of the Bank cutting rates this week have jumped to 74 percent, from 11 percent just before the result of the June 23 referendum was announced. British growth is expected to be most affected by the aftermath of the Brexit vote, many economists are also cutting their growth forecasts for the Eurozone, the U. K’s biggest single importer. Though net exports — the U. K’s total exports, minus total imports — may rise, it could be driven in large part by a decline in imports.
There are other reasons that the U.K. economy might not enjoy a sales spike to foreign buyers due to the fall in sterling. Modern supply chains are complex and international, meaning companies do not benefit as much from depreciation. Even a firm that exports, for example, a manufactured final product, may import many of its components. The final product is cheaper for international buyers at its current sterling price, but if the parts that make it were more expensive to the manufacturer, that competitive advantage is blunted.
 
Sterling is currently being traded few points above 1.29 level. Pair is likely to find support around 1.2850 handle and resistance above 1.30 level.
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