GBP/USD bearish short-term – Scotiabank

FX Strategists at Scotiabank remain negative on Cable in the short-term horizon.

Key Quotes

“UK house prices slid sharply in Apr, according to The Halifax building society’s home price index; home values fell 3.1% last month, the biggest monthly fall in this index since 2010. Quarterly prices fell 0.1%, smoothing out some of the month-to-month fluctuations but that still represented a third consecutive drop. Mortgage demand weakened, reflecting cooling demand for housing broadly. Sterling’s slide has stabilized around 1.35 but the markets remain in a holding pattern ahead of the BoE policy decision this week (no change expected but investors will gauge the likelihood of a rate adjustment over the balance of the year via the voting split of policy makers)”.

“Cable has steadied above 1.35 but the market undertone remains weak in the short and medium term. Loss of key support last week condemns the pound to more weakness, we feel. Short-term patterns are consolidative but point to limited scope for the GBP to recover near-term. We look for a 1.35/1.36 range to persist near-term but bearish trend indicators suggest a break under 1.35 is more likely than a rebound above 1.36 in the next few days. Rallies will attract GBP sellers”.