British Pound: BoE risks in focus – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret note the British Pound (GBP) is softer against the Dollar but still outperforming most G10 currencies in a risk-off environment. Markets expect a hawkish hold from the Bank of England (BoE) on Thursday, with a possible 25 bp hike in November. The analysts point to supportive UK-US yield spreads and see technical support around 1.3450–1.3420, with resistance above 1.3550.

Sterling softer ahead of BoE

"The pound is soft, down 0.3% vs. the USD while outperforming most of the G10 currencies in an environment of broad-based risk aversion and USD strength. The focus for the pound this week will center on domestic risk as market participants look to Thursday’s BoE where policymakers are widely expected to deliver a hawkish hold while leaning toward a 25bpt hike at the next meeting in early November."

"The fundamental release schedule is also relatively heavy and includes Tuesday’s jobs and Wednesday’s CPI ahead of the central bank decision, followed by retail sales on Friday. Fundamentals remain supportive as we note the clear uptrend in UK-US yield spreads since early July. Political developments have been limited despite high profile coverage of UK plans for potentially higher taxes on banks. The medium-term risk event is the fall budget scheduled for October 28."

"Neutral—the latest pullback in spot is notable and the local early September low has been marginally (and only briefly) breached, with support offered by the 50 day MA at 1.3481. The chart offers additional support at 1.3450 and 1.3420 with near-term resistance expected above 1.3550."

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