Yield Spreads & Potential Fiscal Worry Weigh On GBP

Fresh pressure for GBP in recent trade, with little new headline flow alongside the move.

• Continued fallout from BoE Deputy Governor Ramsden’s dovish Friday comments are eyed, with UK paper outperforming German & U.S. peers across the curve.
• Elsewhere, deeper speculation of further pre-election fiscal loosening in the UK may be factoring in as well (albeit not into cross-market rates), given the track record of fairly limited tailwinds for UK growth following the recent rounds of policy easing. Questions re: broader fiscal credibility may also be doing the rounds in light of the speculation.
• Technical headwinds deepen for GBP in major pairs as a result.
• Cable shows as low as $1.2351 as Friday’s low and the 61.8% retracement of the Oct 4-Mar 8 bull leg ($1.2364) give way. Bears now eye the Nov 14 ’23 low ($1.2266)
• Friday saw EUR/GBP close above GBP0.8600 for the first time since January. Today’s GBP weakness sees the cross show as high as GBP0.8626. Next resistance is seen at the 50.0% retracement of the Nov 20-Feb 14 bear cycle (GBP0.8633), which protects the Jan 4 high (GBP0.8640).
• The UK calendar is limited today.