GBP steady but remains vulnerable - Scotiabank

The Pound Sterling (GBP) has recovered from early European session weakness and is entering Monday's NA session unchanged against the US Dollar (USD). The outlook for relative central bank policy is weighing on the pound as market participants consider dovish comments from BoE Gov, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

GBP semains vulnerable to shifting BoE/Fed outlook

"Bailey, with a specific focus on the labor market and the potential response to a greater than expected deterioration. The options market reveals a continued erosion in sentiment as markets price greater premiums for protection against GBP weakness. Interest rate differentials are also shifting against the GBP, as price in greater near-term easing from the BoE."

"The bull trend is faltering as we note the break of the 50 day MA (1.3500) support level. Momentum has drifted into bearish territory as the RSI has fallen below 50. We look to near-term support at 1.3450 and see greater support in the upper 1.33s, around the late June low. Resistance is expected at 1.3520."