GBP/USD near-term trend looks consolidative - Scotiabank

Shaun Osborne, Strategist at Scotiabank, notes that the GBP/USD sell-off has clearly lost momentum in the short-run but there is scant evidence of a stronger base of reversal developing

Key Quotes

“UK labour market data was a little better than expected. Employment rose 106k in the last three months through August – reflecting a slowdown in the pace of hiring but suggests trends remain quite healthy considering Brexit worries. Weekly earnings rose modestly to 2.3% y/y in August, up from 2.2% (revised) in July. The GBP slipped on Bloomberg reporting that Germany would close down “back door” talks with the UK on Brexit, however, renewing concerns about “a hard Brexit” impact. Fundamentally, we think the GBP remains vulnerable and has yet to find a sustainable base.” 

“GBPUSD short-term technicals: neutral/negative—Sterling is just about holding on to yesterday’s gains but is clearly struggling to extend this week’s rebound above 1.2325. The near-term trend in the GBP looks consolidative.” 

“The GBP sell-off has clearly lost momentum in the short-run but there is scant evidence of a stronger base of reversal developing. We still rather see current trends as a pause ahead of another push lower. Gains through 1.2325/50 might give speculators a chance to sell nearer 1.2450/1.25 but we are not hopeful that the GBP can really gain any more ground from here.”