GBP/USD: Trading softer on the day - Scotiabank

BoE MPC's Greene sounded cautious on the near-term outlook for policy in remarks yesterday, Scotiabank's Chief FX Strategist Shaun Osborne notes.  

BoE shows caution on rate outlook

"She noted that while inflationary pressures were moderating, the government's recent budget would lift prices and that wage growth was still too high. She noted that the risk of cutting too early was greater than going slowly on policy accommodation."

"Governor Bailey echoed the cautious stance today, stating that the UK government's recently announced increase in employer National Insurance contributions could result in higher prices, lower employment or other outcomes. The governor said the BoE will have to move cautiously on policy as it monitors these impacts. Markets remain reluctant to price in more than a minimal chance of a rate cut at the Bank's December policy meeting."

"Moderate gains in the pound yesterday have not developed into a serious challenge of the broader downtrend in spot. Rather, price action appears to be a consolidation in recent weakness ahead of another push lower. Minor support is 1.26 ahead of long-term trend support at 1.2575. Resistance is 1.2680/90."