Scotiabank strategists Shaun Osborne and Eric Theoret note the British Pound (GBP) is softer versus the US Dollar (USD) after mildly disappointing Purchasing Managers’ Index (PMI) and CBI data, with market reaction muted.
Political focus turns to Andy Burnham’s upcoming economic speech and the choice of Chancellor, as investors remain wary of UK fiscal risks
Technically, GBP/USD holds above recent lows, with support near 1.31 and an expected 1.3180–1.3280 range. Sterling pressured by data and politics “The pound is soft, down 0.3% vs. the USD and a mid-performer among the G10 currencies with movement generally following broader themes and developments.” “The latest preliminary PMI’s delivered marginal disappointment across both manufacturing (modest expansion printing 53.1) and services (sub-50 contraction at 48.7). CBI business sentiment also disappointed, however the overall reaction to both releases appears relatively muted.” “In politics, the favored future Labour Party leader (and presumed future PM) Andy Burnham is said to be preparing to deliver a speech next week, in which he will outline his economic plan.
Fiscal risk remains a core concern for markets as participants look specifically to the choice of Chancellor.” “Burnham is a left-leaning candidate and markets may struggle to remain confident in the UK’s fiscal outlook without a clear re-commitment to the self-imposed fiscal rules championed by current Chancellor Reeves.” “Bearish – the pound is holding above both Friday’s lows as well as the late March lows, offering some near-term reassurance relative to the EUR. Both lows were observed in the mid-1.31s, offering little in terms of distance from current spot.” “The daily chart reveals additional support at the early November low just above 1.30. Momentum is bearish but off its recent oversold low.