British Pound: Sentiment supports further gains against US Dollar – Scotiabank

Market impact: Moderately bullish GBP/USD, but vulnerable to positioning-related pullbacks.

Scotiabank’s view is supportive of sterling because GBP is outperforming other G10 currencies even while the US dollar remains broadly firm. That relative strength suggests the move is not dependent solely on dollar weakness; it reflects improving demand for sterling and reduced concern about downside risks. The reported improvement in GBP risk reversals indicates that options traders are paying less for downside protection, potentially reinforcing upside momentum through hedging flows.

For GBP/USD, this creates a constructive near-term bias toward a retest of the 2026 high in the upper-1.38s. The article identifies resistance above 1.3650 and support around 1.3600 and 1.3550, making those areas relevant for judging whether bullish sentiment is being confirmed or rejected. These are analytical reference points from Scotiabank, not standalone signals.

The main medium-term catalyst is likely to be the UK’s October 28 budget. A credible fiscal package could extend sterling’s gains by lowering concerns over UK debt sustainability and improving investor confidence; unexpectedly expansionary or politically contentious measures could reverse the current sentiment improvement. The Prime Minister’s visit to Kyiv is a secondary geopolitical catalyst: positive diplomatic developments may support risk appetite, while escalation would likely increase demand for the US dollar and undermine GBP.

The bullish case is therefore strongest if GBP continues to outperform on crosses, option-market demand remains favorable, and UK fiscal risks stay contained. However, the pound’s RSI is near the overbought threshold around 70, increasing the risk of a short-term consolidation or correction even if the broader bias remains positive. A renewed broad-based dollar rally, weaker UK data, or a deterioration in budget expectations would invalidate the constructive interpretation. Traders should monitor UK fiscal headlines, GBP risk reversals, US rate expectations, and whether GBP/USD can sustain gains above the cited resistance zone rather than merely testing it.