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GBP Vol Profile Flattens as Busy Week Captures Lead-Up to May BoE

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  • The high frequency of UK risk events this week has prompted a solid rally in the front-end of the vol curve, with 1-week vols touching new multi-month highs today – last topped when capturing both the February BoE & MPR as well as US nonfarm payrolls.
  • This week’s data provides the last look at UK inflation, wages and retail sales ahead of the May 9th rate decision as well as Lombardelli’s hearing – at which she’ll likely make her first public comments on monetary policy since being appointed as Deputy Governor for Monetary Policy in February (her term on the MPC starts in July, so August 1st BoE decision will be her first vote on policy).
  • This leaves the one-week breakeven on a GBP/USD straddle at ~100 pips, leaving support at 1.2427 – last week’s GBP/USD low - exposed ahead of 1.2364, seen as firmer support. Conversely, a hawkish sequence of data releases this week would turn focus to the 1.2582 200-dma.
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