Pound was offered across the board in Europe after the preliminary PMI readings for July highlighted a sharp deterioration of the activity. It is a known fact that PMIs have been on a declining trend since 2013, but the drop in July is obviously being blamed on Brexit.
This forced markets to sell Sterling in anticipation of BOE rate cut/QE in August.
Technical outlook
Sterling’s retreat from the high of 1.3290 on weak data if results in a break below 1.3064 would suggest an end of the corrective rally from the post Bexit low of 1.2789 and open doors for a slide to 1.29 levels next week.
In case, 1.3604 holds till Monday’s NY session, the odds of a rebound to 1.3315 (23.6% of 1.5019-1.2789) would increase.
Further gains towards 1.35 would need a day end closing above 1.3315.