GBP is ignoring stronger than expected CPI as yield spreads support - Scotiabank

The Pound Sterling (GBP) is also entering Wednesday's NA session unchanged against the US Dollar (USD), recovering from early Asian session losses on the back of a stronger than expected CPI release, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

GBP is trading steady on the day

"Headline CPI printed 3.8% y/y on both headline and core, surprising to the upside and also rising from the prior release. Domestic rate expectations remain unchanged however, and the outlook for relative central bank policy remains supportive with UK-US yield spreads trending higher since late July. Near-term domestic risk remains elevated into Thursday's release of public finance figures and the preliminary PMI's.

"The multi-month trend is bullish with a clear sequence of higher highs and higher lows since January. The bull trend looks to have flattened over the past couple of months, with a wide congestion range around 1.35. The RSI is neutral, just above 50, and we look to a near-term range bound between 1.3450 support and 1.3550 resistance."