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FOREX: GBP/USD Presses to New YTD Highs, Markets Cognizant of Reversal Risk

FOREX
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GBP/USD's latest press higher has spot through yesterday's highs and touching a new YTD best of 1.2952, extending the rally off the YTD lows to 7%. GBP's not leading strength across G10 here, again underscoring that it's the USD weakness that's driving price action (GBP/JPY, GBP/EUR still well below recent highs).

  • The USD Index has broken to another pullback low today of 103.329 - this cements the erasure of the post-election gains - and exposes 102.521 in the process. JOLTS jobs data will be the next point of focus here, with markets looking to gauge higher quality insight into the jobs market after Friday's NFP.
  • We note that options markets are isolating EUR, JPY, SEK and NOK as the most sensitive currencies to tomorrow's US CPI print - with overnight implied adding over 7 points in the lead-up to tomorrow's print. Given outsized spot gains for all four currencies against the USD, markets may be increasingly cognizant of reversal risks, particularly as EUR net positioning shifts much closer to neutral after maintaining a sizeable net short for ~three months.
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GBP/USD's latest press higher has spot through yesterday's highs and touching a new YTD best of 1.2952, extending the rally off the YTD lows to 7%. GBP's not leading strength across G10 here, again underscoring that it's the USD weakness that's driving price action (GBP/JPY, GBP/EUR still well below recent highs).

  • The USD Index has broken to another pullback low today of 103.329 - this cements the erasure of the post-election gains - and exposes 102.521 in the process. JOLTS jobs data will be the next point of focus here, with markets looking to gauge higher quality insight into the jobs market after Friday's NFP.
  • We note that options markets are isolating EUR, JPY, SEK and NOK as the most sensitive currencies to tomorrow's US CPI print - with overnight implied adding over 7 points in the lead-up to tomorrow's print. Given outsized spot gains for all four currencies against the USD, markets may be increasingly cognizant of reversal risks, particularly as EUR net positioning shifts much closer to neutral after maintaining a sizeable net short for ~three months.