Scotiabank strategists Shaun Osborne and Eric Theoret note that the British Pound (GBP) is consolidating recent gains around 1.3400, with domestic risk elevated ahead of next week’s CPI, labour data and the Bank of England decision. Markets expect a hold but price about 35 bps of tightening by year-end. Technically, GBP/USD is recovering, supported in the low 1.33s and capped near the 50-day moving average around 1.3469.

BoE guidance and politics keep risks elevated

"The pound is also quietly consolidating Thursday’s sentimentdriven gains and trading within a relatively tight range around 1.3400, entering Friday’s NA session flat to the USD with a 0.6% gain on the week. "

"Domestic releases included April’s monthly GDP (as expected), industrial production (marginal disappointment), and trade (wider than expected deficit) data. Domestic risk will remain elevated next week, with CPI on Wednesday and jobs on Thursday. The BoE’s rate decision is also scheduled for Thursday, along with the by-election for Andy Burnham the leading candidate to replace PM Starmer as head of the Labour Party. "

"Expectations for the BoE are muted, with a widely anticipated hold. Risk lies with the MPC’s statement and its guidance on the rate outlook, with markets currently pricing about 35bpts of tightening by year end. Political risk is elevated as we await the outcome of the by-election."

"Bearish/neutral—the RSI is extending its recovery and closing in on the neutral threshold at 50. Recent price action has confirmed nearterm support in the low 1.33s."

"We note the potential for near-term resistance at the 50 day MA (1.3469). We look to a near-term range bound between 1.3350 and 1.3450."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)