GBP/USD inter-markets: life after the BoE

GBP/USD is now shedding over a cent since the spike post-BoE to fresh highs beyond 1.3460.

In the meantime, market participants keep digesting the steady (surprising for many) stance from the Bank of England at today’s meeting and at the same time have already sparked speculations over the potential easing measures likely to be announced by the ‘Old Lady’ at the meeting next month.

After rallying more than six big-figures since last week’s lows in sub-1.2800 levels, and with prospects of looser monetary conditions almost ‘confirmed’ by MPC members, Cable is left with two potential scenarios: either a continuation of the ongoing up move or the start of a leg lower.

With the political effervescence in the UK somewhat mitigated for the time being, spot could face some consolidation in the near term however, with a clearer direction set to emerge in the next weeks along with signals from the BoE and officials.

Additionally, GBP is deriving further support from the UK money markets, with yields navigating a ‘sea of green’ across the curve. Volatility in terms of VIX remains subdued, echoing the current risk-on conditions in the global markets and lending extra legs to the Sterling.

All in all, potential economic and political implications following the ‘Brexit’ vote are everything but abated and will keep weighing on GBP in the next months. However, in the nearer horizon, RO/RO trends will rule the global sentiment, always assuming a ‘no-hike’ scenario from the Fed, at least until December or Q1’17.