Major sterling weakness ahead of BoE - Scotiabank

Analysts at Scotiabank explained that GBP is underperforming the G10, dropping in response to the release of weaker than expected CPI data for August—0.6% y/y vs. 0.7% expected. 

Key Quotes:

"Domestic risk for GBP is set to remain elevated throughout the week as we look to Wednesday’s employment (specifically wages) ahead of Thursday’s retail sales and BoE policy decision (hold widely anticipated)."

"The impact of the broader tone appears somewhat limited in the current context as we consider GBP’s risk profile and its tendency to perform on a relative basis in periods of risk aversion. 

Measures of implied volatility are low and risk reversals are steady pricing in a slight premium for protection against GBP weakness."