GBP/USD could edge lower towards the 1.27/26 area – Scotiabank

GBP/USD is choppy in range above 1.30 but remains prone to weakness. Further weakening of below 1.30 is likely as rate hike bets for the Bank of England (BoE) are set to be trimmed.

There is room to go in the GBP’s leg lower

“Widening gilts-UST yield differentials have begun to weigh more clearly on the pound in recent trading, but we think there’s room to go in the GBP’s leg lower with the 5-yr spread currently sitting at its most negative level since October 2019.”

“We think it may only be a matter of time before markets begin to chip away at extended BoE pricing and the gap between year-end hike expectations widens further to drag sterling to re-test 1.30 and possibly head toward the 1.26/27 zone.”