GBP/USD is pushing lower and testing levels below 1.1300

• The pound attempts to extend below 1.1300 on retreat from 1.1445.
• Investors scale down hopes of aggressive BoE tightening.
• GBP/USD might decline towards the mid-1.11s – Scotiabank.

The pound is giving away gains on Tuesday, following a 1% rally on Monday as the UK Government ditched most of the tax cuts plan announced in September. The sterling us testing prices sub-1.1300 on retreat from Monday’s highs at 1.1445.

The pound retreats as the market resize BoE hike hopes

UK finance minister’s U-turn on the controversial mini-Budget plan has dampened hopes of aggressive monetary tightening by the Bank of England. This has discouraged GBP buyers, which has been one of the main reasons behind Tuesday’s reversal.

Earlier in the day, the pound saw some positive price action after the Financial Times reported that the Bank of England might be considering delaying the start of its quantitative tightening (QT) gilt sales from the scheduled date of Oct. 31, after having already delayed it from Oct. 6.

The Bank, however, denied the Financial Times ‘report later on. The BoE assured that they do not contemplate any postponement of the start of government bonds’ sales, which has sent the GBP lower again.

GBP/USD: The risk of further decline to the mid-1.11s – ScotiaBank

FX analysts at UBS Scotiabank maintain their negative outlook on the pair, pointing out to targets below 1.1200:  “Intraday support in the upper 1.12s is coming under pressure. Below here, cable risks dipping back to the mid-1.11s (…) Political and economic risks for the GBP remain elevated.”

Technical levels to watch