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GBP: Impact of Dovish Bailey Persists Through NY Open

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GBP/USD edging lower still in recent trade to touch a new pullback low at 1.3099 - this keeps the pair on track for a near-term test of the 50-dma support at 1.3070 as Bailey's dovish comments this morning juice the odds of back-to-back 25bps rate cuts at the Nov, Dec meetings.

  • Concurrently, EURGBP has pierced 50-day EMA support at 0.8424 as this morning’s rally extends. The cross is now 1.25% higher today, with next resistance seen at 0.8464 (Sep 11 high).
  • As such, no surprise to see 3m risk reversals (capturing the remaining BoE meetings this year) have tilted further in favour of put vol, touching levels last seen in mid-August. This puts GBP/USD well below year-end sell-side consensus of 1.3200, and raises the implied probability of the pair below September lows of 1.3002 to 40% at year-end, and below August lows of 1.2665 to 19% (from 19% and 7% this time last week).
  • Further weakness and a break below the 50-dma would expose key support at the uptrendline drawn off the '22 low of 1.0350 - today crossing at 1.2861.
  • Near-term macro focus turns to today’s US macro data, including jobless claims (1330BST) and ISM services (1500BST).
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GBP/USD edging lower still in recent trade to touch a new pullback low at 1.3099 - this keeps the pair on track for a near-term test of the 50-dma support at 1.3070 as Bailey's dovish comments this morning juice the odds of back-to-back 25bps rate cuts at the Nov, Dec meetings.

  • Concurrently, EURGBP has pierced 50-day EMA support at 0.8424 as this morning’s rally extends. The cross is now 1.25% higher today, with next resistance seen at 0.8464 (Sep 11 high).
  • As such, no surprise to see 3m risk reversals (capturing the remaining BoE meetings this year) have tilted further in favour of put vol, touching levels last seen in mid-August. This puts GBP/USD well below year-end sell-side consensus of 1.3200, and raises the implied probability of the pair below September lows of 1.3002 to 40% at year-end, and below August lows of 1.2665 to 19% (from 19% and 7% this time last week).
  • Further weakness and a break below the 50-dma would expose key support at the uptrendline drawn off the '22 low of 1.0350 - today crossing at 1.2861.
  • Near-term macro focus turns to today’s US macro data, including jobless claims (1330BST) and ISM services (1500BST).