GBP/USD could see limited upside - Scotiabank

Shaun Osborne, Chief FX Strategist at Scotiabank noted that today’s Bank of England decision may provide the GBP with modest support in the short run but we continue to see limited upside risks for the GBP at the moment.

Key Quotes

“Sterling popped on the BoE decision to keep policy unchanged. Many were looking for at least a 25bps cut today (and we were anticipating even more aggressive steps) after Gov Carney indicated that more accommodation might be required in response to Brexit. The overnight rate remains at 0.5% and asset purchases are unchanged at GBP375bn.”

“The policy statement said that most officials expect to ease policy in August. The BoE decision may provide the GBP with modest support in the short run but we continue to see limited upside risks for the GBP at the moment.”

“GBPUSD short-term technicals: bullish—GBP/USD’s spurt higher this morning gives the GBP a slightly stronger profile on the short term charts but the rebound is only now and only barely touching the 1.3337 23.6% Fib retracement of the sell-off from 1.50+ on June 23. Longer-term charts do look more constructive but the force of the broader bear trend remains strong and, if Cable cannot progress above the minimum retracement of the late June/early July slide, recovery prospects will look pretty bleak.”