The Pound Sterling (GBP) is weak, down 0.4% against the US Dollar (USD) and underperforming all of the G10 currencies with a break of its mid-October low and a push to levels last (briefly) seen in early August, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Markets eye BoE with risk of cuts in November

"Focus is on the BoE as short-term rate expectations drift lower and major banks call for cuts at the next meeting on November 6th. Markets are currently only pricing 9bpts for the upcoming meeting and 18bpts for December. Recent inflation data were softer than expected and policymakers have called attention to the deterioration in the labor market."

"Interest rate differentials are moving against the GBP as UK-US spreads extend their recent bearish reversal and correlation studies reveal a renewed strengthening in the GBP/spread relationship."

"The latest decline has broken the 200 day MA (1.3241) and the mid-October low in the mid-1.32s and is targeting the August 1 low around 1.3150. The RSI is bearish in the low 30s but not yet at the oversold threshold. The mid-1.31 area is critical, reflecting the lower bound of the range since May. We look to a near-term range bound between 1.3180 and 1.3280."