British Pound: Sentiment supports further gains against US Dollar – Scotiabank

Scotiabank analysts Shaun Osborne and Eric Theoret have highlighted that the British Pound (GBP) is currently flat against the US Dollar (USD) but outperforming other G10 currencies despite the overall strength of the USD. With no significant data releases, market focus has shifted towards Prime Minister Boris Johnson's visit to Kiev and the upcoming October 28 budget.

Enhanced market sentiment is evident in options markets, with analysts believing there is potential for GBP/USD to reach the 2026 high in the upper-1.38s range. The pound is trading nearly unchanged against the USD in Monday's session, while outpacing all G10 currencies in an environment of broad USD strength. The release calendar remains empty, and the near-term focus appears to be on the PM Burnham visit.

Measures of sentiment have indicated a notable improvement in the market's outlook for the GBP, with risk reversals showing steady gains as the options market reduces the premium for downside protection. The GBP's Relative Strength Index (RSI) stands at 70, hovering near the overbought threshold and just below last week's peak. Recent price action has pushed resistance above 1.3650, with limited additional resistance expected between the current spot price and the 2026 peak in the upper-1.38s.

Near-term support is expected at 1.3600 and 1.3550. GBP/USD has been struggling to extend its recovery, flirting with the 1.3650 level. While the currency struggles to maintain upward momentum, it remains strong in the upper part of its recent range, challenging multi-week highs despite the dollar's recovery. Meanwhile, EUR/USD remains in a narrow range, hovering around the 1.1670 region amid modest losses, as investors closely monitor developments from the US money market.

Gold prices have been on a bullish trend, nearing the $4,700 mark for the first time since early May, despite slight gains in the USD and a modest pullback in US Treasury yields across the curve.