GBP/USD: GBP holds retracement support in the low 1.31s - Scotiabank

The UK S&P Global Manufacturing PMI for August was confirmed at 52.5 yesterday, the strongest result for the index in a little over two years, Scotiabank's Chief FX Strategist Shaun Osborne notes.

GBP gains above 1.3160 may drive some short-term gains

"Growth momentum, still elevated wages and inflation hotspots will keep the BoE sidelined in September (just 5-6bps of cuts are priced in for the policy meeting on the 19th) as many other core central banks ease policy. Slower rate cuts in the UK relative to other top central banks should limit scope for GBP losses in the near term."

"GBP/USD has corrected a bit less than a quarter of the August rally and looks to be finding support around 1.3120 Fibonacci retracement (23.6% of the 1.2660/1.3266 rally). A low close on the week through Friday suggests consolidation rather than outright bearishness for the pound."

"GBP gains above 1.3160 may drive some short-term gains while a push under 1.3120 will likely drive a little more weakness towards the 1.2950/1.3050 range."