24-hour view: Last Friday, GBP fell to a low of 1.2548. Yesterday, we highlighted that “downward momentum has not increased much; this combined with oversold conditions, suggests that GBP is unlikely to weaken much further.” We expected GBP to trade sideways in a range of 1.2545/1.2625. In line with our expectations, GBP traded sideways, albeit in a narrower range than expected (1.2568/1.2609). Further sideways trading appears likely. The slightly firm underlying tone suggest a higher range of 1.2670/1.2650.

Next 1-3 weeks: Our update from last Friday (25 Aug, spot at 1.2600) still stands. As highlighted, the recent increase in downward momentum suggests GBP is likely to weaken to 1.2530, possibly 1.2480. We will continue to hold the same view as long as GBP stays below the ‘strong resistance’ at 1.2685 (no change in level from yesterday). That said, GBP could consolidate for 1-2 days first.