High volatility in GBP/USD
Sterling has edged into the top spot on the G10 currency leaderboard today.
I believe that mostly reflects an overshoot last week and broad US dollar weakness but there’s a slice of good domestic news too. Daily covid cases are back to 9K after hitting a four-month high of 10,811 late last week. Much of that is weekly variance (cases are always low on Monday) but it’s something to cling to. Another interesting note is that on his way out the door, BOE chief economists Andy Haldane signaled a looming inflation problem, saying risk are now “tilted very decisively in the direction of that upside risk.”
Technically, the bounce came exactly where you would hope. The low on Friday almost perfectly matched the April 29 low.
In the bigger picture, today is the first day of summer and last week’s volatility might have carved out the trading range for weeks to come. Most traders aren’t eager to pick sides in the inflation or rate debate yet, so it will be a matter of waiting and watching data. There’s a natural ebb and flow in the economic numbers and I can see the 1.38-1.42 range holding until there’s a strong sense of what inflation and growth will do.
