Cable

Sterling achieved something rather remarkable last week. It traded at 1.35 against the US Dollar, which is the highest level in 3 years. For those of us that can remember the Brexit referendum will recognize the significance. The current level was support once. Then it was resistance. Now it’s been left behind. The question is, where do we go from here? 

There is obviously a lot going on. UK economic data came in firmer than expected, with consumers still spending and inflation holding up just enough to push back on rate-cut expectations. Labour is also trying to get us closer to Europe again, which at the very least would remove some barriers to trade and buoy the economy regardless of what Farage may say.

Meanwhile, the Dollar stumbled. Whether due to fresh doubts about U.S. trade policy or a cooling in recent Fed rhetoric, the greenback faces headwinds not least of which due to uncertainties about what Donald Trump will do next. Weakening the reserve currency may very well be part of the plan, but the bond markets have other ideas and are signalling a limit to the President’s power.

Technically, there is scant resistance until we hit 1.40. On the other hand, we have been here ten times before in recent times, and if patterns are your thing, we only managed to break higher twice, in 2018 and 2021. In each of the eight instances when we failed, cable went all the way back to 1.20. Lest we forget, we almost hit parity before Trussonomics went the way of the lettuce.