British Pound: Sentiment offsets softer spreads – Scotiabank

Scotiabank's analysts observe the British Pound experiencing minor weakness against the US Dollar, with economic indicators less supportive due to narrowing yield spreads. However, sentiment is gradually improving as markets dismiss previous political apprehensions following the appointment of Prime Minister Burnham and better-than-anticipated construction Purchasing Managers' Index.

Technicals on a short-term basis remain optimistic, with forecasts anticipating gains above 1.3550 in the medium term and a near-term trading range between 1.3420 and 1.3520. "The pound is showing a slight decline into Thursday's NA session, declining 0.1% from the previous day's close," notes the bank. "Recent data releases are limited to third-tier construction PMI figures (44.7 versus 40.0 expected and 38.4 prior), indicating an unexpected resurgence in an index that remains predominantly in contractionary territory."

"Fundamentals do appear to be somewhat less supportive for the GBP, as yields are softening again," adds the bank. "Sentiment remains positive, though, as traders continue to dismiss politically-driven concerns following the recent political transition and Burnham's arrival. Burnham's pledge to fiscal responsibility appears to be more robust than initially anticipated."

"The bullish RSI's recent recovery has been less intense compared to the EUR, currently sitting in the upper 50s, signaling a slightly lower momentum reading," the bank concludes. The GBP/USD pair is trading at a loss on Thursday, bouncing back to the 1.3450 level. This resumption of selling occurs after two consecutive gains and aligns with the enhanced sentiment around the US Dollar amid fresh concerns in the Middle East.

EUR/USD, meanwhile, faces renewed downside pressure and tests the low 1.1500 range during the final part of the NA trading session. The downward move in the spot market is spurred by two consecutive daily gains and a renewed bid bias in the US Dollar, as fresh effervescence emerges in the Middle East. As the week progresses, US Nonfarm Payrolls data will assume prominence on Friday.

In an accompanying piece, Andrew Maguire, alongside Peter Antico and Sean Stone, discusses The Paradigm of Money, delving into the intricacies of financial market corruption, including naked shorting and the dual-tier system that safeguards Wall Street.