GBP tentatively extending last week’s recovery – Scotiabank

The Pound Sterling (GBP) is also trading in a tight range and entering Monday’s NA session with a tentative extension of last week’s recovery, Scotiabank’s Chief FX Strategists Shaun Osborne and Eric Theoret report.

Near-term balance of risk appears to favor gains

“The recovery has been fundamentally driven, with a stabilization and modest rise in yield spreads that have delivered critical support for the GBP. Markets have largely priced a December cut from the BoE, and the rates curve has actually drifted higher over the past week or so.”

“Near-term risk lies with this week’s economic releases, including Tuesday’s employment data and Thursday’s Q3 GDP (preliminary), trade, and industrial production figures. The UK’s fiscal situation remains a source of headline risk but markets appear to have confidence in Chancellor Reeves’ efforts to adhere to self-imposed rules.”

“The RSI has recovered from deeply oversold (sub-30) levels following GBP/USD’s bounce off of support just above 1.30. The near-term balance of risk appears to favor gains, given the tentative extension of last week’s bullish reversal. We see limited near-term resistance ahead of the 1.3300/1.3350 range that offered congestion in late October.”