Scotiabank strategists Shaun Osborne and Eric Theoret note the British Pound (GBP) is slightly firmer versus the US Dollar (USD), with modestly better PMIs but a fading fundamental backdrop as 2-year spreads give back gains since late June. With limited data before the August 13 Q2 GDP release, they remain medium-term bullish, expecting GBP/USD to trade between 1.3420 and 1.3520 near term within a broader 1.31–1.35 range.
Sterling steady with medium-term bullish bias
“The pound is entering Wednesday’s NA session with a fractional 0.1% gain vs. the USD. The Final services and composite PMI’s for July saw fractional improvements while indicating marginal growth overall.”
“The release calendar is limited over the next week or so with no major data scheduled ahead of the preliminary Q2 GDP print on August 13.”
“The fundamental picture for the GBP looks to have faded since mid-July, with 2Y spreads relinquishing much of their recovery from late June.”
“The options market offers some reassurance, likely reflecting a continued improvement in sentiment towards the UK’s political situation.”
“Neutral/bullish—the RSI is slightly above the neutral threshold at 50 and looks to have found a more solid footing in the aftermath of last week’s gains.”
“The local range remains bound between late June support in the mid1.31s and mid-July resistance in the mid-1.35s. We remain medium-term bulls and look to a near-term range bound between 1.3420 and 1.3520.
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