British Pound: Political relief offsets rate expectations – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret note GBP/USD is slightly lower versus the US Dollar (USD) but outperforming most G10 peers. Mixed labour data and elevated domestic risk ahead of Consumer Price Index (CPI), PMIs (Purchasing Managers' Index) and retail sales weigh on the British Pound (GBP). However, Andy Burnham’s pledge to maintain fiscal rules and easing downside hedging costs provide some support, while technicals suggest a 1.3350–1.3450 near-term range with sub-50 but recovering RSI.

Range trade as politics steadies sentiment

"The pound is entering Tuesday’s NA session with a fractional 0.1% loss vs. the USD as it shows relative gains against all of the G10 currencies with the exception of the Skandies NOK and SEK."

"Domestic risk remains elevated into Wednesday’s CPI and Thursday’s preliminary PMI’s, ending the week with retail sales on Friday."

"In terms of politics, the latest developments are offering reassurance as market participants consider Andy Burnham’s pledge to maintain existing fiscal rules if he were to assume leadership of the UK Labour Party."

"Fundamentally, GBP rate support is eroding in response to the latest softening in UK rate expectations, while sentiment is providing an important offset as the political situation offers support and a softening in the premium for protection against GBP weakness."

"Bearish/neutral – the RSI is sub-50 but already showing signs of a recovery from last week’s low. Support has been clearly observed in the low 1.33s and spot has returned to congestion around the clustered 50/200 day MA’s at 1.3430/1.3425. We look to a near-term range bound between 1.3350 and 1.3450."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)