GBP/USD: BoE DG reiterates caution on policy outlook - Scotiabank

The Pound Sterling (GBP) is modestly higher on the session, tracking its G10 peers for the most part. BoE DG Lombardelli reiterated her caution on the policy outlook in an interview with the FT, Scotiabank's Chief FX Strategist Shaun Osborne notes.

GBP gains modestly

"The latest comments go a little further in defining the 'cautious' approach to policy adjustment that her colleagues have referenced in recent comments. Lombardelli wants to see more evidence of the 'disinflation process continuing' before easing again. Markets continue to price in around 80% risk of a 25bps cut in February, with the Bank widely expected to take a pass at the December decision."

"Cable has been pressuring minor trend resistance off the early November high in spot over the past couple of sessions and has managed to make a clean break above that point (now intraday support) at 1.2591 so far today."

"Gains are not pushing on decisively above recent peaks around 1.2615 at this point, however, and the broader pattern of recent trade still looks more like a consolidation ahead of renewed losses rather than a reversal in the November track lower in the pound. Short-term gains could extend to the mid/upper 1.26s but a move through 1.2715 resistance is needed to inject a little more technical strength in the near-term outlook."