Scotiabank analysts Shaun Osborne and Eric Theoret note that GBP/USD is lower on the day and well off its one-year high, reached earlier in the week on optimism that incoming Prime Minister Burnham will pursue market-friendly policies. Despite the late-week slippage, that view remains intact, with trend oscillators staying bullish and firm support expected near 1.34.
Political Shift and Technical Support at 1.34
“Sterling is down on the day and well off the 1-year peak seen earlier this week around optimism that Burnham — who takes over as PM next week — will follow market-friendly policies. Despite the pound’s late-week slippage, that outlook appears to remain intact.”
“The Burnham government looks poised to strike out in a different direction than Starmer’s. Reports suggest that he will permit new drilling permits for oil and gas in the North Sea — Labour under Starmer veered away from boosting North Sea energy — and will announce plans to take the troubled Thames Water utility back under public control, where Starmer had preferred a private sector solution. President Trump will like the ‘drill, baby drill’ look to the new government, at least.”
“Neutral/bullish — Solid gains in GBP on Wednesday have partially reversed over the balance of the week. Trend oscillators lean bullish on the intraday, daily, and weekly DMIs, which should help sustain the broader trend higher going forward.”
“We look for firm support on dips to the 1.34 zone.”
With bullish technical signals aligned across multiple timeframes and political tailwinds from the incoming Burnham administration, Scotiabank sees the underlying GBP/USD uptrend remaining supported despite near-term consolidation.
