Extends gains to near mid 1.32s – Scotiabank

Sterling rose to near 1.3250 in overnight trade before easing, notes Shaun Osborne, chief FX strategist at Scotiabank.

The cable risks testing the 1.3200/05 trend support

“UK bonds have underperformed, giving the pound modest support for yield, but Cable’s steady rise since the start of Asian trade suggests a buying program has been behind the gains rather than anything fundamental. The BRC shop price index fell in y/y terms (-0.3%) for the first time in nearly three years, suggesting easing UK inflationary pressures.

“GBP bull trend remains resilient after overnight gains extended to mid-1.32s. Deviation from the high is starting to show a minor downside for the pound and suggests that Cable is at risk of falling a bit further intraday now to test the 1.3200/05 trend support. Support below is at 1.3125.