GBP Bearish Reversal Continues Ahead of BoE Meeting

The British Pound (GBP) is experiencing a bearish reversal, extending its decline towards early July levels as markets adjust their expectations of Bank of England (BoE) tightening. According to Scotiabank strategists Shaun Osborne and Eric Theoret, the pound's softening is due in part to reduced pricing for BoE tightening. September pricing has been cut from 20 basis points (bpts) to 13 bpts, while cumulative hikes by December have fallen by about 12 bpts to 37 bpts.

The technical indicators are bearish, with the Relative Strength Index (RSI) slipping and threatening a push below 40. The pound's price action is currently bound between the mid-1.31s and mid-1.35s, with near-term support at 1.3250 and resistance at 1.3350.

The data calendar ahead of Thursday's BoE meeting is limited, but the central bank will publish its latest forecast update. The pound has lost some of its fundamental support due to spreads, with short-term rate markets fading their pricing of BoE tightening.