GBP Recovery Eyes 1.36 Cap Amid Fading Risk Reversals

The British Pound (GBP) is experiencing a recovery, which Scotiabank strategists Shaun Osborne and Eric Theoret believe may be capped at around 1.36 against the US Dollar (USD).

This consolidation near recent highs reflects an improvement in UK political risk perception and slightly more constructive yield spreads supporting GBP/USD.

According to Osborne and Theoret, price action is closely tied to fading downside risk reversals, which have been a key driver of the pound's movement lately.

The strategists note that while the technical setup remains constructive, there may be near-term resistance closer to 1.3600 and the May peaks in the mid-1.36s, with support seen in the mid/lower 1.34s.