British Pound: Break below 1.35 shifts focus lower against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret describe GBP/USD as soft but mid-pack within the G10, with domestic data and Bank of England (BoE) events limited ahead of Governor Bailey’s speech. They stress the role of political sentiment under PM Burnham in prior Pound strength, now challenged by higher Oil prices. Technically, the break of 1.35 refocuses attention on support in the mid‑1.34s and 1.33.

Political sentiment and Oil weigh on Pound

"The GBP is soft, down 0.3% vs. the USD but still a mid-performer among the G10 in an environment of broad-based USD strength. Domestic releases have been limited and the BoE calendar is empty ahead of Friday’s speech from Gov. Bailey."

"Political developments have been equally limited, offering little to market participants in search of domestic drivers. We continue to highlight the importance of sentiment – specifically, politically-related sentiment – in driving the recent strength in the pound following the arrival of PM Burnham in late June."

"The shift had been clearly observed in risk reversals as the options market had faded its premium for protection against downside risk. However the latest surge in oil prices appears to be eroding this key source of support, and riskies are once again pricing a higher premium for downside protection. "

"Neutral/bearish – the RSI’s plunge into bearish territory has been swift however the momentum indicator is already in the mid-40s and spot’s defensive price action suggests little scope for near-term stabilization."

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