GBP/USD remains neutral, could break below 1.30 – Scotiabank

FX Strategists at Scotiabank deemed probable a break below the 1.3000 area in the near term.

Key Quotes

“UK government borrowing was a little lower than forecast in Sep (GBP4.1bn, versus GBP4.5bn expected) but the data were clearly not much of a mover for the GBP. USD strength and continuing concerns over Brexit are keeping the GBP tone defensive. Hopes that PM May’s “emerging” idea – not a formal proposal as such – of extending the transition period might help resolve the current impasse is unlikely to pass parliamentary muster. The outlook for Brexit – and for PM May herself – remains challenging, in our opinion”.

“The GBP’s slide over through the middle of the week leaves the market resting on support just above 1.30. Spot is trading below the 40-day MA (1.3057) that has served as a good bellwether guide for the pound’s broader fortunes. The weekly GBPUSD close is likely to be soft and we think a push below 1.30 (a stronger possibility unless the GBP can regain 1.3060+) will leave the pound vulnerable to a push to 1.2920/25 major support”.