Scotiabank strategists Shaun Osborne and Eric Theoret say British Pound (GBP) is softer versus the Dollar as markets stay cautious ahead of Wednesday’s UK budget. Overnight GBP/USD volatility is firmer, but a fiscally credible package is expected to be neutral for the Pound. Technically, they see GBP/USD below minor support, with risks of a pullback toward the 1.3250–1.3275 area before bargain-hunting emerges.
Fiscal event risk keeps Sterling subdued
"Caution ahead of Wednesday’s UK budget accounts for some of the GBP’s softness against the USD."
"Overnight GBP/USD vols are firmer, reflecting caution ahead of Chancellor Healey’s set-piece delivery tomorrow but a budget that maintains fiscal credibility will likely be GBP-neutral at worst."
"The GBP retains a soft undertone versus the USD, driving spot below minor support at 1.3350/55."
"That leaves the October 19th low at 1.3300 exposed and lifts the risk of the pound easing back to the 1.3250/75 range to retrace a little more of its mid-month rebound."
"Modest GBP losses should entice support from bargain-hunters."
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