British pound dropped dramatically during the past week, losing 400 points. UK currency was hit by the weak inflation figures and tragic news from Brussels. Social unrest in the European Union raises fears about a potential Brexit. According to the most recent polls, more than 40% of the British voters would like to leave the European Union.
Technically, GBP/USD formed a strong red candle on the past week, but met some buying interest at 1.4050. However, on a monthly chart we see a second candle with a long upper shadow being formed. We expect a break below 1.4050 to happen next week and target 1.35 in the near term. The picture could turn bullish after a weekly fix above 1.4180.
UK economic calendar for the new week is rather light. Monday is a banking holiday. On Thursday, UK is scheduled to release current account data and the final Q4 GDP reading. What’s more, on Thursday the BOE governor Marc Carney will deliver a speech at the Financial Stability Board Plenary meeting in Tokyo. On Friday pay attention to the UK manufacturing PMI.