GBP/USD keeps the neutral/bearish mood – Scotiabank

In opinion of FX Strategists at Scotiabank, Cable’s near-term outlook remains neutral to bearish.

Key Quotes

“Sterling had a poor day yesterday after the BoE left interest rates unchanged (no surprise) and appeared to indicate little hurry to tighten again in the near term. Gov. Carney made the rounds of TV news shows last night and helped clarify the rate outlook by suggesting that higher rates remained likely this year. OIS rallied yesterday, pricing out all risk of an Aug rate tightening but the contract sold off today, pricing in around 8bps worth of a 25bps hike back in, supporting the GBP. Brexit policy remains a risk for the GBP, however, and we still think the near-to-medium term outlook for the pound may be challenging”.

“Cable has reversed yesterday’s push below the recent consolidation range base around 1.35, implying a “false break” and paving the way for a return to the 1.36 area now and perhaps a modest extension beyond that point. Choppy price trends are muddying near-term prospects but the broader outlook for the GBP remains weak while Cable remains below 1.3715 (major double top breakdown point)”.