The softened underlying suggests Pound Sterling (GBP) may retest the 1.3400 level; a continued decline below this level is unlikely. In the longer run, GBP is likely to trade in a range between 1.3360 and 1.3525, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

GBP is likely to trade in a range

24-HOUR VIEW: "Two days ago, GBP rose briefly to 1.3527 and then retreated. Yesterday, we pointed out that 'the brief advance did not result in any significant increase in upward momentum, and GBP is unlikely to rise much further.' We were of the view that GBP 'is more likely to consolidate in a range of 1.3455/1.3525.' We did not anticipate the extent of the price swings, as GBP rose to 1.3507, plummeted to 1.3402, and then rebounded to close at 1.3439 (-0.28%). While there has been no marked increase in downward momentum, the softened underlying tone suggests GBP may retest the 1.3400 level. Based on the current momentum, we do not expect a continued decline below this level. On the upside, resistance levels are at 1.3465 and 1.3485."

1-3 WEEKS VIEW: "We highlighted on Tuesday (30 Sep, spot at 1.3435) that GBP 'is likely to trade in a range between 1.3360 and 1.3525.' After GBP subsequently rose slightly and briefly above 1.3525 (high was 1.3527), we indicated yesterday that “there has been no clear increase in upward momentum, and we continue to expect GBP to trade between 1.3360 and 1.3525 for now.” Our view remains unchanged."