The Pound Sterling (GBP) is slightly stronger as traders await Wednesday’s UK budget, with much pessimism already priced in and rising odds of a near-term relief rally, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

GBP extends mild rebound as markets await budget

"The pound is up a marginal 0.1% vs. the USD and a mid-performer among the G10 currencies as it tentatively extends its retracement of last Wednesday’s notable decline. Domestic releases have been limited to second-tier CBI sentiment data, and market participants remain squarely focused on Wednesday’s budget release."

"Sentiment remains weak but we feel that a lot of bad news is already priced in, leaving the balance of risk tilted to the upside with a high probability of a near-term post-budget relief rally."