GBP extending bear run - Scotiabank

The Pound Sterling (GBP) is weak, down 0.4% against the US Dollar (USD) and underperforming most of the G10 currencies as we head into Friday's NA session, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

GBP is down ahead of next week's anticipated BoE

"The pound's bear run is notable as it threatens a break of its mid-May low, opening up the risk of a decline to levels last seen in mid-April. Focus is on fundamentals, and specifically next Thursday's BoE, where a 25bpt cut (to 4.00%) is widely expected. Unlike the EUR, the pound's yield spreads have been trending gently lower since April, eroding a critical source of support."

"The final manufacturing PMI, released earlier Friday, offered a minor disappointment to an already worrisome contractionary (sub-50) reading, softening to 48.0 from 48.2 in the preliminary."

"Technicals are bearish and the RSI is deeply oversold. The latest bear run is threatening the mid-May lows and opening up the potential for a push toward anticipated support at the psychologically important 1.28 level, around the 200 day MA (1.2978). We look to a near-term range bound between 1.3120 support and 1.3220 resistance."