The Pound Sterling (GBP) is modestly firmer against the US Dollar (USD), outperforming most G10 peers despite a lack of meaningful domestic data. With risk sentiment largely unchanged and options markets offering few directional signals, GBP strength appears driven by geopolitical flows and confidence in the US-UK relationship, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Sterling resilient on US-UK relationship narrative

"The pound is up a fractional 0.1% vs. the USD and outperforming all of the G10 currencies with the exception of JPY. Domestic releases have been limited to second-tier credit/lending data, suggesting that the pound’s resilience is likely being driven by flows related to geopolitics and reflects the market’s assessment of the strength of the US/UK relationship."

"Risk reversals are little changed, offering little in terms of sentiment-driven movement. We are neutral awaiting a break of the two week range roughly bound between 1.34 and the mid1.35s."