Even though the GBP/USD struggles to hold above 1.27 after last week's bearish close, the pair continues to find support in the upper 1.26s, Shaun Osborne, the Chief FX Strategist at Scotiabank, argues.

GBP to establish a base in the upper 1.26s or in the high 1.25s

“UK CPI data tomorrow is expected to see prices rise 0.4% in the May month but slow to 2.0% in the year. Policymakers are expected to leave the Bank Rate on hold at 5.25% Thursday, however, given still elevated core inflation (forecast to slow to 3.5% in May).”

“The latest opinion poll data show Labour’s substantial lead holding up while PM Sunak’s Conservatives are sagging below 20%, polling at or close to their lowest ever levels of support.”

“Cable continues to find firm support in the upper 1.26s. But there is little staying power in gains which have struggled to hold 1.27+ levels after last week’s bearish close for the GBP. It feels like the pound has more work to do to establish a base—either holding in the upper 1.26s or finding a foothold at a lower level in the high 1.25s perhaps before it can steady and improve.”