British Pound: Consolidation against US Dollar before UK data and BoE – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret observe GBP/USD currently stagnant as the pair recovers from recent lows, with risk factors primed for an uptick following the release of United Kingdom (UK) trade and industrial data. They anticipate a cautious stance from the Bank of England (BoE) the following week, with traders already pricing tightening measures by November.

In technical terms, Sterling is confined within the mid-1.35s, but remains buoyed between the upper-1.34s within a rising channel. Despite the relatively quiet domestic release and calendar this week, heightened risk is expected Friday as markets digest the latest trade and industrial production data.

The imminent jobs and consumer price index (CPI) figures for next week provide further risk factors as the Bank of England figures to deliver a cautious hold during Thursday's meeting. As policymakers are widely expected to maintain the status quo, short-term rate markets have already priced roughly 19 basis points of tightening for the November 5th decision.

Fiscal concerns continue to dominate sentiment, as the budget scheduled for late October remains a critical factor in the GBP's outlook. Positive sentiment trends persist, bolstering the GBP's prospects.

Ultimately, a break of the tight short-term range is awaited, but medium-term risks lean bullish due to the evident ascending trend channel from late June. Neutral market sentiment prevails, as the Relative Strength Index (RSI) remains close to neutral, hovering just above the 50 threshold. Price action this week has unveiled a clear challenge to surpass resistance in the mid-1.35s, thus limiting the near-term risk of a retreat towards the local high around 1.3650.