GBP/USD stays neutral/bearish near term – Scotiabank

Shaun Osborne, Chief FX Strategist at Scotiabank, believes Cable could re-visit the 1.2800 handle in the near term.

Key Quotes

“Sterling is sluggish; month to date, the GBP has fallen 2.5% against a generally soft USD, reflecting mixed data reports this week – soft housing, lending data and business sentiment – as well as the ongoing uncertainty that is being generated by the Brexit process. Persistent warnings from some BoE policy makers that rate rises may still be warranted are having little effect on sentiment. We remain negative on the GBP’s broader outlook but we also conscious of the “valuation” perspective that leaves the pound looking attractive in the longer run against some crosses”.

“Cable gains stalled around the 40-day MA earlier in the week, giving short-term patterns a slightly negative tone but the broader pattern of trade looks flat, with the market essentially trading in a range around 1.30 since April”.

“We think 1.2980/00 should cap GBP gains for now and if the USD can push the pound back under support at 1.2850/60 near-term, we expect Cable to retest 1.2800”.