The Pound Sterling made significant gains, reaching close to 1.3250 before pulling back, as observed by Scotiabank’s Chief FX Strategist Shaun Osborne
Potential Support Test for Cable at 1.3200/05
Osborne notes that the UK Gilts are not performing as well, providing only modest yield support to the pound. The rise in Cable during Asian trade seems to be driven more by a buy program rather than any fundamental factors. Additionally, the BRC’s Shop Price Index has experienced a decrease in year-on-year terms (-0.3%), indicating a reduction in inflationary pressures in the UK.
Despite the slight retreat from the overnight high, the bull trend for GBP remains strong with gains extending into the mid-1.32s. However, the potential downside risk is looming as Cable may slip back to test trend support at 1.3200/05. Further support can be found at 1.3125.
Analysis:
In summary, the Pound Sterling has shown resilience in its upward trend, reaching near 1.3250 before experiencing a slight pullback. The performance of UK Gilts has been moderate, providing only minimal support to the pound’s yield. The decrease in the BRC’s Shop Price Index suggests a reduction in inflationary pressures in the UK. As the pound faces potential downside risks, investors should monitor the support levels at 1.3200/05 and 1.3125 for potential trading opportunities.