GBP/USD - lowest daily close since Jan 23

Friday’s GBP/USD closing level of 1.2405 is the lowest since Jan 23, which should not come as a surprise given the back-to-back weak UK data release. 

UK inflation, labor data and Friday’s retail sales number, all pointed to a slowdown in the post-Brexit economic boom. Many are speculating that the boom may have come to an abrupt end as consumers feel the pinch of higher imported inflation. 

Pound mildly undervalued as per BIS data

Bank for International Settlement (BIS) monthly real effective exchange rates released on Feb 16th showed the Pound is hovering just below 100.00 levels. A reading above 100.00 means the currency is overvalued, while a reading below 100.00 means the currency is undervalued.

Pound may be mildly undervalued, although it could get worse later this year on the back of record current account deficit to GDP ratio and Brexit fears. 

GBP/USD Technical Levels

The spot clocked a high of 1.2441 earlier today and was last seen trading flat lined around 1.2410. A break above 1.2444 (5-DMA) would expose 1.2524 (Feb 16 high), above which a major hurdle is seen at 1.2548 (Feb 14 high). On the downside, a breakdown of support at 1.2387 (previous session’s low) could open up downside towards 1.2346 (Feb 7 low) and 1.23 (zero figure).