GBP/USD: risk of a drop back to 1.28/1.29 as economic/Brexit uncertainties persist - Scotiabank

Analysts at Scotiabank noted that the pound tumbled yesterday as the USD firmed broadly.

Key Quotes:

"PM May barely managed to push through her Brexit plans in parliament and has dropped sharply again this morning following weaker than expected inflation data – flat on the month in Jun versus +0.2% expected, for a 2.4% gain in the year (steady over the May reading but below expectations for a +2.6% print)."

"BoE rate hike expectations have slipped modestly but markets continue to price in a roughly 80% chance of a rate hike on Aug 2nd. That may help limit weakness in the pound in the short run but we do not exclude the risk of a drop back to 1.28/1.29 near-term as economic and Brexit uncertainties persist. Former minister Johnson may use a resignation speech in parliament to twist the knife in PM’s Brexit approach."