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Hedging Support For GBPUSD Higher Has Begun to Thin Out

GBP
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  • Since the beginning of May, GBP/USD’s rally off the April lows has kept spot within range of resistance and the bull trigger at mid-April’s 1.2709. Over the same period, UK rate cut expectations for year-end 2024 have been rebuilt, with Dec’24 OIS pricing a cumulative ~58bps of rate cuts vs. ~40bps at the beginning of the month – potentially signalling some resilience in the spot price to the BoE policy cycle.
  • Tracked option flows across the month, however, have coalesced around the 1.2500 handle, with ITM call strikes also layered in size between 1.2550-1.2650 (see below), while downside exposure seems focused on puts between 1.2500-1.2400. With spot already north of 1.2650, the appetite for spot higher still from hedging markets begins to thin out.
  • UK services CPI on Wednesday next week provides a key determinant for the likelihood of a June BoE cut (currently ~60% priced), we’d expect a sizeable uptick in overnight implied vols (12.5 points would match pre-inflation data levels seen YTD) – and imply a near 60 pip swing from prevailing levels across the release.


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  • Since the beginning of May, GBP/USD’s rally off the April lows has kept spot within range of resistance and the bull trigger at mid-April’s 1.2709. Over the same period, UK rate cut expectations for year-end 2024 have been rebuilt, with Dec’24 OIS pricing a cumulative ~58bps of rate cuts vs. ~40bps at the beginning of the month – potentially signalling some resilience in the spot price to the BoE policy cycle.
  • Tracked option flows across the month, however, have coalesced around the 1.2500 handle, with ITM call strikes also layered in size between 1.2550-1.2650 (see below), while downside exposure seems focused on puts between 1.2500-1.2400. With spot already north of 1.2650, the appetite for spot higher still from hedging markets begins to thin out.
  • UK services CPI on Wednesday next week provides a key determinant for the likelihood of a June BoE cut (currently ~60% priced), we’d expect a sizeable uptick in overnight implied vols (12.5 points would match pre-inflation data levels seen YTD) – and imply a near 60 pip swing from prevailing levels across the release.