GBP/USD still bearish, key support at 1.3165  - Scotiabank

Shaun Osborne, Chief Strategist at Scotiabank, notes that GBP/USD holds the bearish tone ahead of the BoE decision. Scotiabank looks for a 25bps cut in the bank’s key rate (to 0.25%) and for an additional GBP50 bn in QE.

Key Quotes

“Markets are looking for easing measures from the BoE tomorrow but there is some debate about how aggressive the BoE will be. Scotia looks for a 25bps cut in the bank’s key rate (to 0.25%) and for an additional GBP50 bn in QE. There is a consensus on the rate cut, less so on the asset purchase issue. Recall that CFTC data Friday showed record speculative net GBP shorts, suggesting ample room for a squeeze on positioning in the event of the BoE disappointing expectations.”

“GBPUSD short-term technicals: neutral/bearish—Sterling popped higher yesterday as the USD weakened broadly but there has been no follow through interest in the market this morning and intraday signals rather suggest the rally (which has been confined to recent ranges) has run out of steam.”

“Price action has been confined to a triangular consolidation range since the late June sell-off; these formations are typically continuation patterns – which rather suggests an ongoing vulnerability to the downside. We see short-term gains capped around 1.3375/1.3425. Key support is 1.3165. We remain bearish.”