GBP: String of better than expected data is encouraging a bout of short-covering - BBH

Research Team at BBH, suggests that Sterling is marching to a different beat than the euro and yen as the string of better than expected data is encouraging a bout of short-covering, and forcing participants to re-think the extent that the BOE will ease. 

Key Quotes

“We have been monitoring the downtrend line drawn off the post-referendum highs in June, July, and August.  It was breached the day before the US jobs report and held on the pullback afterward (~$1.3250).  Above $1.3375, the high from early August, a significant test is in the $1.3500-1.3565 band, the high since the referendum.

The euro trended lower against sterling last week.  It has convincingly broken below GBP0.8400.  We have suggested the August low of GBP0.8345 as a reasonable near-term target.  The GBP0.8280 area is the 38.2% retracement of the post-referendum move.  A break of that could spur a move to the 50% retracement and post-referendum low near GBP0.8145.”