The Pound Sterling (GBP) is steady against the US Dollar (USD), trading with modest support as it extends Wednesday’s bull reversal, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Markets eye Fed/BoE divergence

"Movement has been limited in the absence of any major domestic data releases. Fundamentals are offering material support as we note the continued climb in the 2Y UK-US yield spread. This is largely a reflection of shifting Fed expectations as the BoE outlook has remained largely unchanged over the past week or so."

"This week’s comments from BoE MPC member Mann were neutral, preferring to maintain the Bank Rate at current levels. The RSI is extending further into bullish territory following its recent pullback to neutral levels around 50."

"GBP/USD is also crucially back above its 50 day MA (1.3496), and it looks to have also broken above descending resistance drawn from the August 14/22 highs. We see limited resistance ahead of the upper 1.35s and look to a near-term range bound between 1.3480 and 1.3580."