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Safe Haven Demand As Global Yields Fall Sharply, GBP Under Pressure

FOREX
  • Historic rallies for European/UK Government bonds on Thursday weighed heavily on the Euro and GBP as the BoE and ECB meetings suggested potential for more dovish rate hike paths ahead than previously expected.
  • Following on from a dovish-leaning Fed press conference on Wednesday, US yields also shifted lower, however, the more moderate moves worked in favour of the greenback overall, with the USD index rising roughly 0.5%.
  • Lower core yields also benefitted the Japanese yen which sits just behind the USD as one of the top G10 performers. The weakness in cross/JPY was certainly a yield play on Thursday as the dovish interpretations of major policy meetings kept global equity indices on an overall buoyant trajectory.
  • The likes of EUR, AUD and CHF all fell between 0.6-0.9%, slowly erasing the post FOMC gains seen yesterday. GBP declines of 1.14% standout with 1.24 capping the topside in cable and the pair breaking below initial firm support at 1.2264, the Jan 24 low.
  • EURGBP continues to trade with a stealthy bid tone and this week’s bull run reinforces a technically bullish theme and the cross has pierced resistance at 0.8897, the Jan 13 high and a bull trigger. A clear break of this level would confirm a resumption of the uptrend that started early December last year.
  • Focus turns to Friday’s US employment report for January, where the Bloomberg median sees nonfarm payrolls rising 190k after a broadly in line 223k December print. The Fed will also come out of blackout with SF Fed Daly the first scheduled speaker at 1900GMT/1430ET.
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