GBP Consolidates Against USD as Fiscal Risk Remains Elevated Ahead of Budget

According to Scotiabank strategists Shaun Osborne and Eric Theoret, the British Pound (GBP) is currently consolidating within a tight range against the US Dollar (USD), hovering around the mid-1.36 level.

This consolidation follows a quiet data release calendar and a lack of significant Bank of England (BoE) activity for much of August. However, yield spreads have softened, which has eroded some fundamental support for the GBP.

The analysts also note that improved sentiment after the leadership transition to PM Burnham has offset concerns related to the change in leadership, but warn that fiscal risk will remain elevated ahead of the October 28 Autumn Statement (budget).

Technically, the GBP's rally from late July appears to have stalled above 1.3650, and Osborne and Theoret see a near-term range-bound scenario between 1.3600 and 1.3700.