GBP is outperforming with modest gain - Scotiabank

The Pound Sterling (GBP) is up marginally against the US Dollar (USD) and outperforming all of the G10 currencies as we head into Thursday's NA session. Fundamental releases have been limited to second tier data, suggesting that the GBP's relative outperformance can be attributed to a recovery in sentiment following Tuesday's fiscal turbulence, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

GBP is supported by sentiment and recovery from fiscal turbulence

"The path forward remains challenging as markets consider the looming Nov 26 budget and its implications for growth, however the anticipated fiscal restraint remains a critical source of confidence for markets and should serve to limit the recent spiral in borrowing costs."

"The outlook for relative central bank policy remains supportive and the 2Y UK-US spread is hitting a fresh marginal high at levels last seen in October. As with EUR, markets are slowly shedding their easing bias, offering the GBP support as cuts are priced out."

"The RSI has recovered back to 50 and the 50 day MA (1.3483) remains a powerful level attracting near-term congestion. This week's extended candle shadows have highlighted the importance of support below 1.3400, and resistance appears limited ahead of 1.3600. We look to a near-term range bound between 1.3400 support and 1.3500 resistance."