GBP recoverys post CPI/jobs data with fundamental support via spreads - Scotiabank

The Pound Sterling (GBP) is up a modest 0.2% against US Dollar (USD) as it mildly underperforms its G10 peers heading into Friday's NA open, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

GBP is up on the daily charts

"The GBP's latest gains are offering some reassurance following a meaningful pullback from its July 1 high, primarily driven by domestic developments--specifically fiscal concerns and renewed dovishness from the BoE."

"This week's data have delivered fundamental support with rates market fading their pricing of cuts on the back of stronger than expected CPI and solid labor market data. The next BoE meeting is on August 7 and markets are still pricing in nearly one full 25bpt cut and nearly 50bpts of cumulative easing by December."

"GBP/USD's latest gains are offering the possibility of a second local low in the upper 1.33s. The RSI remains bearish under 50 but has recovered and is pushing back toward the neutral threshold. A return to the 50 day MA (1.3505) would provide further reassurance that the bull trend remains intact. We look to near-term support below 1.3400 and see no resistance ahead of 1.3550."