Scotiabank strategists Shaun Osborne and Eric Theoret said the Pound (GBP) is consolidating after Wednesday’s rebound against the US Dollar (USD). They said domestic risk looks limited ahead of upcoming Bank of England speeches and data.
GBP was up 0.1% versus USD, pointing to consolidation after the prior day’s recovery. They linked recent moves to a geopolitical risk premium affecting the pound, and said improved market tone could support further gains.
Momentum Signals Favor The Pound
They said fundamentals and sentiment measures support GBP strength and suggest reduced downside risk. The RSI moved into bullish territory after breaking above 50.
GBP reached a one-month high in the upper 1.34s, but they noted resistance above 1.3480. They said the 50-day and 200-day moving averages at 1.3439 and 1.3414 were broken, with upside targets at 1.35 and 1.3580.
They set a near-term range of 1.3350 to 1.3450. The article was produced with an AI tool and reviewed by an editor.
Looking back, we see the bullish calls for the Pound were directionally correct, though the targets around 1.35 now seem modest from our April 2026 perspective. The fundamental picture that was just starting to improve then has since accelerated dramatically. The old resistance near 1.3480 has now become a distant floor in the market’s memory.
Policy Divergence Drives Sterling
The Bank of England’s unexpected rate hike in February 2026 completely changed the game, a direct response to stubborn services inflation which remains a key concern. The most recent data confirmed this move, with March’s CPI print coming in hot at 3.5%, forcing the market to price out any rate cuts for the remainder of the year. This monetary policy divergence is now the primary driver for the pound.
Meanwhile, we have seen the Federal Reserve’s tone shift considerably, with recent weak payroll numbers raising expectations for a rate cut later this year. The market is now pricing in over a 60% chance of a cut by the third quarter, a stark contrast to the BoE’s hawkish stance. This policy gap between the two central banks continues to heavily favor the pound over the dollar.
Given the pound is now trading strongly above 1.38, we believe traders should consider strategies that benefit from further upside and elevated volatility. Buying call options or implementing bull call spreads with strike prices targeting the 1.40 psychological level could capture the next leg of this trend. Implied volatility has climbed to 8.5%, suggesting the options market is pricing in significant moves in the coming weeks.
