British Pound: Policy risk with range-bound trade against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that GBP/USD is flat around 1.33, supported by stronger United Kingdom (UK) lending data and stabilizing Bank of England (BoE) expectations. They stress that UK fiscal narratives remain important for sentiment toward government debt. The Monetary Policy Committee (MPC) is expected to deliver a hawkish hold at 3.75%, while technically the British Pound (GBP) trades in a June range between 1.3150 and 1.3550, with near‑term moves seen between 1.3250 and 1.3350.

Hawkish BoE hold risk within tight range

"The pound is also quiet and also entering Wednesday’s NA session flat vs. the USD as it also consolidates within a remarkably tight range—around 1.33. The fundamental release calendar has included the latest lending and money supply data, offering a notable beat on both mortgage approvals and a sizeable jump in lending."

"Domestic political developments have been limited however UK media continue to focus PM Burnham’s fiscally-motivated plans for welfare reform."

"The narrative is important, as the UK remains vulnerable to sentiment toward its government debt market. As with EUR (and ECB), BoE rate expectations are showing signs of stabilization and offering some modest support to the GBP via yield spreads."

"Policy risk is elevated over the next 24 hours as we look to the 2pm ET FOMC and Thursday’s BoE—where the MPC is expected to deliver a hawkish hold at 3.75%."

"Bearish/neutral—the RSI is showing signs of stabilization in the lower 40s, implying modest bearish momentum below the neutral threshold at 50. The local range from June is bound between support near 1.3150 and resistance closer to 1.3550. We remain neutral absent a break of the range, and see near-term movement bound between 1.3250 and 1.3350. "

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