The British Pound (GBP) is consolidating its recent gains against the US Dollar, trading near the upper end of both its one-month and multi-month ranges, according to Scotiabank strategists Shaun Osborne and Eric Theoret [1]. The currency's price action is closely linked to fading downside risk reversals, indicating reduced demand for protection against GBP depreciation [1]. This trend reflects an improved market assessment of UK political risk, which, along with slightly more constructive yield spreads, is supporting the pound's recovery [1].
Technical analysis points to resistance for GBP/USD around 1.3600 and the May peaks in the mid-1.36s, with support identified in the mid/lower 1.34s [1]. The strategists note that the pound is currently range-bound between 1.3450 and 1.3550, and the overall technical setup remains constructive as GBP recovers toward its mid-July peak in the mid-1.35s and the upper end of its range since mid-February [1].
The release calendar is described as limited ahead of Thursday’s Q3 GDP data, as well as upcoming trade and industrial production figures for June [1]. Yield spreads, which had experienced a modest pullback in mid/late July, are now showing signs of renewed recovery, further supporting the pound's near-term outlook [1].
Scotiabank's analysis suggests scope for further near-term strength in the pound, contingent on continued improvement in market sentiment and political risk perception [1].
CONCLUSION
The British Pound is consolidating near recent highs, supported by improved UK political risk perception and constructive yield spreads. Technicals suggest a range-bound outlook with potential for further near-term strength if positive sentiment persists. Market participants are watching upcoming economic data for additional direction.