GBP trading in a tight range around 1.36 - Scotiabank

Pound Sterling (GBP) is entering Wednesday's NA session unchanged vs. the US Dollar (USD), consolidating in a tight range around 1.36 and trading just below Tuesday's multiyear high that reached levels last seen in January 2022, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

GBP is at levels last seen in January 2022

"As with the EUR, much of the GBP's recent gains have been driven by fundamentals and specifically a shift in the outlook for relative central bank policy, with UK-US yield spread moving about 15bpts in the GBP's favor over the past couple of weeks."

"This week's domestic calendar remains limited to second and third-tier sentiment releases and will leave the pound vulnerable to US data and the broader market's tone. In terms of sentiment, GBP/USD risk reversals continue to price a slight risk premium for puts over calls, owing to recent tensions in the middle east, and an unwind of this offers another source of near-term upside for the pound."

"The trend is bullish, with a clear sequence of higher lows and higher highs since January. The latest gains have pushed the pound to levels last seen in January 2022, and the recovery in the RSI hints to renewed momentum as it confirms the trend. We see no major resistance ahead of 1.3750."