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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
FOREX
- Global risk off environment combined with renewed geopolitical risk have been weighing on 'risk-on' assets, including GBP.
- Historically, the British pound has been the weakest performing currency in high-volatility regime among the G10 world, averaging -30bps in monthly returns when VIX is trading above 20.
- The top chart shows the average monthly performance of the G9 currencies (vs. USD) when the VIX rises above 20 since January 1990 (VIX inception); the choice is arbitrary but a VIX higher than 20 has generally been defined as a 'high-volatility regime'.
- In addition, we have seen that GBP/USD has shown a strong co-movement with EM equities since the EU referendum in June 2016 (bottom chart).
- Therefore, the underperformance of theUK economy (relative to the US), rising recession risks (BoE raised flag today that UK is heading for a recession), vulnerable EM equities and persistent USD strength could continue to weigh on Sterling in the near to medium term.
- Cable broke back below its 1.25 support in today's trading session, which corresponds to the 61.8% Fibo retracement of the 1.1410 - 1.4250 range.
- Next support to watch on the downside stands at 1.2260 (June 2020 low).
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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