Pound Range Trade Holds Ahead of Q2 GDP Release

The British Pound (GBP) has been trading within a range against the US Dollar (USD), according to Scotiabank strategists Shaun Osborne and Eric Theoret. The pair is currently slightly firmer, with modestly better PMIs but a fading fundamental backdrop as 2-year spreads give back gains since late June.

Osborne and Theoret note that the release calendar is limited over the next week or so, with no major data scheduled ahead of the preliminary Q2 GDP print on August 13. Despite this, they remain medium-term bullish, expecting GBP/USD to trade between 1.3420 and 1.3520 near term within a broader 1.31-1.35 range.

The fundamental picture for the GBP has faded since mid-July, with 2Y spreads relinquishing much of their recovery from late June. However, the options market offers some reassurance, likely reflecting a continued improvement in sentiment towards the UK's political situation.