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Soft Activity Data No Game Changer for GBP/USD Range

GBP
  • We wrote yesterday that the softer inflation data had made little change to the options-implied range for GBP/USD over the coming three months - with contracts capturing the next two BoE decisions, the May MPR as well as the 6th March UK Budget - and assigning a 50% likelihood for the pair holding between 1.2283-1.2820 at expiry.
  • That pattern persists despite the weak UK growth data today and confirmation of technical recession - evident in the continued pullback in GBP/USD put vol - the 3m contract sits at a new pullback low of 7.06 points and the lowest level in two years.
  • Spot remains in the lower-half of the '24 range, trading either side of the 1.2565 200-dma. The bear trigger sits just below at 1.2519/00, a break below which open further losses. This turns attention to Friday's retail sales release and June meeting BoE pricing, for which 17bps of rate cuts are currently priced.
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