British Pound: Weekly outside reversal eyes 1.3650 against US Dollar – Scotiabank

Scotiabank analysts highlight that Bank of England Governor Bailey sees little evidence of second-round inflation effects and a more resilient UK economy, with markets still pricing a 25bp hike next month. Technically, GBP/USD has rebounded strongly from mid-week lows, forming a bullish weekly outside range and opening scope to retest the 1.3650–1.3675 area, with key resistance at 1.3435.

Pound recovery points to range highs

"BoE Governor Bailey remarked that there was little evidence yet of second-round inflation effects in the UK while noting that the UK economy was more resilient than expected. The comments had no impact on OIS, with swaps still all but fully committed to a 25bps rate hike early next month."

"Elsewhere, Chancellor Healey will reportedly increase the corporation tax bank surcharge from 3% to 8% as part of next week’s budget in a bid to shore up UK public finances."

"Bullish – Solid GBP gains from Wednesday’s post-US CPI low have driven Cable back to the mid-1.33 area. A clear, bullish reversal is forming on the weekly chart as a result (a major outside range week)."

"With recent price action basing around the low point of the sideways range in place since April, the pound’s rebound suggests gains may extend to retest the upper end of the range (1.3650/75) in the coming weeks. Initial, key resistance sits at 1.3435 (200-day MA)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)