GBP/USD has gathered recovery momentum and climbed above 1.2100. Nonetheless, cable remains fragile and is set to drop below 1.20, economists at MUFG Bank report.

Sales lifted by weather but weakness persists

“The hot dry weather that boosted nominal sales growth in July will have potentially negative consequences as well. Natural gas supply uncertainty is likely to be reinforced by hydro-powered electricity supply as well. The government in Norway is now prioritising refilling its reservoirs and could limit exports of electricity if the situation worsens.” 

“The outlook for consumer spending remains grim with the potential for much greater public sector strike action than on the continent. The nursing union RCN – is recommending strike action by its 465K members which would be the first-ever strike by nurses in the UK.” 

“GBP/USD will be unable to hold levels above 1.2000 as downside risks persist.”