Scotiabank strategists Shaun Osborne and Eric Theoret note the Pound is underperforming against the Dollar, hurt by risk sentiment and a surprise contraction in UK industrial production. The Bank of England faces a difficult policy backdrop as markets shift from dovish expectations to pricing a possible hike by September. Technically, GBP/USD is in a notable bear run with limited support until the 1.30–1.32 area.

Pound underperforms with limited support

"The pound is weak, down nearly 0.6% vs. the USD as it underperforms all of the G10 currencies with the exception of NZD."

"Sentiment is dominating but fundamentals are also delivering added weakness with industrial production delivering an unexpected contraction in January as the better trade balance figures were flattered by an unexpectedly deep contraction in imports."

"The BoE’s challenge is considerable as it seeks to determine the appropriate path for policy, where markets have fully erased their dovish pricing with a drift into tightening and a 50/50 chance of a 25bps hike by September."

"GBP/USD short-term technicals bearish - the latest bear run has been notable, threatening a clear break of the March 3 low in the mid-1.32s."

"We note the absence of any meaningful support between current spot and the 1.30/1.32 range."

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