British Pound: Bearish reversal extends before BoE – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret report GBP/USD is extending its bearish reversal toward early-July levels as markets scale back Bank of England (BoE) tightening expectations. September pricing has been cut and cumulative hikes by December reduced. Technicals are bearish, with Relative Strength Index (RSI) slipping and a range between the mid-1.31s and mid-1.35s, plus nearby support at 1.3250 and resistance at 1.3350.

Pound weighed by softer BoE pricing

"The data calendar is limited ahead of Thursday’s BoE, where the central bank will also publish its latest forecast update."

"As with EUR, the GBP is also seeing a loss of fundamental support via spreads, with short-term rate markets fading their pricing of BoE tightening."

"Pricing for the September meeting has fallen from 20bpts to 13bpts and cumulative tightening by December has fallen by about 12bpts to 37bpts."

"The GBP is soft, down a fractional 0.1% vs. the USD and extending its bearish reversal from its mid-July low with a drift toward levels last seen in early July."

"Bearish—the RSI is drifting further into bearish territory and threatening a push below 40. The local range is bound between the late June low in the mid-1.31s and the mid-July high in the mid-1.35s. We note the potential for near-term support at 1.3250 and see near-term resistance at 1.3350."