Pound Extends Bearish Reversal as BoE Tightening Expectations Fall
The British Pound (GBP) is extending its bearish reversal against the US Dollar (USD), with markets scaling back expectations of Bank of England (BoE) tightening. According to Scotiabank strategists, Shaun Osborne and Eric Theoret, this trend is driven by softer BoE pricing, which has reduced the probability of interest rate hikes in September and December.
The strategists report that pricing for the September meeting has fallen from 20 basis points (bpts) to 13 bpts, while cumulative tightening by December has decreased by about 12 bpts to 37 bpts. This shift in market expectations is weighing on the Pound, which has dropped 0.1% against the USD and is drifting towards levels last seen in early July.
The Relative Strength Index (RSI) is also bearish, with a reading below 40 threatening a push below this key level. The local range for GBP/USD is bound between the late June low in the mid-1.31s and the mid-July high in the mid-1.35s, with near-term support at 1.3250 and resistance at 1.3350.