GBP: Weekly Outside Reversal Targets 1.3650 vs USD – Scotiabank

GBP/USD has formed a weekly outside reversal in recent price action, with Scotiabank analysts citing a technical target of 1.3650. This pattern is typically viewed as a signal of a potential trend shift, providing some technical support for GBP bulls. At the time of writing, GBP/USD is trading near 1.33142, still a considerable distance from the aforementioned target.

**BoE Policy Expectations Provide Support**

Bank of England Governor Bailey's latest remarks downplayed the risk of second-round inflation effects while emphasizing the UK economy's greater resilience. This tone has reinforced market bets on further monetary policy tightening—according to Scotiabank analysts, the market is still pricing in a 25 basis point rate hike next month. If this expectation materializes, shifts in UK-US interest rate differential expectations could provide additional upside momentum for the pound.

**Potential for Technical and Fundamental Convergence**

From a technical perspective, Scotiabank strategists believe that a sustained break above 1.3650 in GBP/USD could open the door for further progress toward the 1.41 region. Combined with fundamentals, the UK economy's relatively solid performance and the central bank's hawkish lean could resonate with the weekly reversal pattern. However, the broadly stronger dollar backdrop remains a key variable constraining the pace of sterling's upside, with the pound having previously faced pressure from broad dollar strength below 1.3250.

**Recent Range Reference**

Historical data shows that GBP/USD's prior high within the 52-week range was 1.3795, with a low of 1.3044. The current spot price of 1.33142 sits in the upper-middle portion of this range, not yet entering extreme overbought territory, suggesting that if subsequent catalysts align, the exchange rate still has room to probe higher. However, it should be noted that any revision to expectations regarding UK inflation or economic growth prospects could interrupt this technical repair process.