GBP/USD Range Trade Continues Ahead of Q2 GDP Release

The British Pound (GBP) has been relatively stable against the US Dollar (USD), with a slight gain of 0.1% on Wednesday's North American session. This stability comes despite modestly better Purchasing Managers' Index (PMI) readings, but a fading fundamental backdrop due to declining two-year spreads since late June.

Scotiabank strategists Shaun Osborne and Eric Theoret remain medium-term bullish on the GBP/USD pair, expecting it to trade within a narrow range of 1.3420 to 1.3520 in the near term. They also anticipate a broader range of 1.31-1.35 for the pair.

The fundamental picture for the GBP has weakened since mid-July, with two-year spreads giving back most of their recovery from late June. The options market is showing some reassurance, possibly reflecting an improvement in sentiment towards the UK's political situation.