Cable retests 1.28 support zone. Economists at Scotiabank analyze GBP/USD outlook.

Bargain hunters may still provide GBP with some support ahead of 1.2760/65

The BoE decision Thursday is expected to result in a tightening of at least 25 bps. At the very least, sterling will need a ‘hawkish tightening’ move to retain a firm undertone and perhaps take another run at the 1.30 zone.

UK yields are trading at a premium to US bond yields along the curve, providing some essential backstopping for the GBP. 

Sterling’s gains have been blocked around 1.2875/85 since late last week and losses through the low 1.28s give the Pound a soft look on the charts. There has, however, been a fairly steady bid for the GBP on dips to the 1.28 area over the past week and bargain hunters may still provide the Pound with some support ahead of support at 1.2760/65.