Category: GBP

  • Pound Slips as BoE Rate Cut Bets Remain in Play – Tuesday, 26 May

    Where we are: GBP/USD currently trades at 1.3468, down 0.26% on the day. Cable has traded in a tight range of 1.3465-1.3505 so far, retreating after a brief push higher in early European trade. This level is below yesterday’s New York close, indicating some mild selling pressure building as we head into the US session.

    What’s driving it: Sterling is softer following recent UK macro prints, with downside surprises to inflation alongside a modest rise in the unemployment rate. Specifically, April’s CPI and Core CPI releases showed significant deceleration (2.8% and 2.5% YoY respectively), further fueling expectations that the Bank of England might be closer to considering rate cuts, despite the MPC voting 8-1 to hold rates at their last meeting with Dhingra dissenting for a cut. The dollar is broadly firmer, with DXY at 99.05, further weighing on GBP/USD, but the core dynamic remains the recalibration of BoE expectations in light of the cooling domestic data. Gilt yields are little changed, with the UK 2Y at 4.283% and the 10Y at 4.850%.

    • The 0.7 percentage point drop in Core CPI suggests disinflationary pressures are building faster than the BoE’s forecasts.
    • CFTC data shows net non-commercial GBP positioning at -64,307 contracts, near the 15th percentile, which increases the risk of a short squeeze on any positive Sterling catalyst.
    • The US-UK 10-year yield spread is at -36bp, providing a modest headwind to Cable, though it is the domestic narrative around the BoE that truly sets the tone.

    NY session focus: All eyes will be on the 10:00 ET release of US CB Consumer Confidence, but the impact on Cable will be secondary to the overarching risk tone and its influence on the DXY. Watch for a break below 1.3465 to open up a test of 1.3430 support. On the upside, a push above 1.3505 could trigger a short squeeze towards 1.3535. The trade that’s working is short GBP/USD on dips, fading any rallies into the 1.35 handle. The pain trade for Cable is a surprise hawkish shift in BoE rhetoric that catches the crowded short positioning off guard.

  • NY Session Tactical Brief – Monday, 25 May

    Regime: Risk-on, supported by falling VIX (16.76) and slightly rising 10Y breakevens (2.4%) despite higher real yields (2.18%).

    Today’s market themes:

    • Oil supply disruption continues as India seeks alternative sources amidst Hormuz Strait tensions.
    • USD strength muted despite higher US real yields, signaling risk appetite.
    • Crowded positioning presents squeeze potential in GBP, JPY, Copper, and Nasdaq.

    The setup: Oil-sensitive assets are reacting to headlines regarding supply disruptions, while broader market risk sentiment remains positive, weighing on the USD. Crowded shorts in JPY and GBP against a backdrop of muted dollar strength create a setup for potential squeeze. Watch US 10Y yield reaction for risk confirmation.

    Watch list (native time per event):

    • 08:30 ET US Durable Goods Orders (forecast vs prior)
    • 10:00 ET US New Home Sales (forecast vs prior)
    • 11:00 ET US Dallas Fed Manufacturing Index (forecast vs prior)

    Bias by asset:

    • DXY:
      • Direction: Neutral
      • Domestic (US): Fed rhetoric on inflation / US data resilience / rising real yields
      • Cross: Global risk appetite / JPY and GBP strength potential
      • Levels: Support 118.80, Resistance 119.50
    • EUR/USD:
      • Direction: Neutral
      • Domestic (EU): ECB caution / Eurozone inflation watch / German yields
      • Cross: DXY weakness / US-DE 10Y narrowing / risk-on flow
      • Levels: Support 1.1620, Resistance 1.1670
    • GBP/USD (Cable):
      • Direction: Bullish
      • Domestic (UK): BoE on hold / softer inflation / Gilt yield stability
      • Cross: DXY weakness / US-UK 10Y narrowing / risk appetite
      • Levels: Support 1.2680, Resistance 1.2750
    • USD/JPY:
      • Direction: Bearish
      • Domestic (JP): BoJ inaction / wage pressure / intervention threat
      • Cross: US 10Y flattening / DXY weakness / risk-on stability
      • Levels: Support 156.50, Resistance 157.50
    • USD/CAD (Loonie):
      • Direction: Neutral
      • Domestic (CA): BoC on hold / CPI watch / WTI correlation
      • Cross: DXY strength / US-CA 10Y widening
      • Levels: Support 1.3780, Resistance 1.3850
    • AUD/USD (Aussie):
      • Direction: Neutral
      • Domestic (AU): RBA on hold / commodity prices / cautious tone
      • Cross: DXY weakness / US-AU 10Y narrowing / China watch
      • Levels: Support 0.7070, Resistance 0.7130
    • NZD/USD (Kiwi):
      • Direction: Neutral
      • Domestic (NZ): RBNZ easing priced in / Dairy prices / subdued tone
      • Cross: DXY weakness / US-NZ 10Y narrowing / risk appetite
      • Levels: Support 0.6400, Resistance 0.6450
    • USD/CHF (Swissy):
      • Direction: Neutral
      • Domestic (CH): SNB watching / CPI stable / neutral stance
      • Cross: DXY strength / safe-haven flows / risk sentiment
      • Levels: Support 0.7770, Resistance 0.7830
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: Neutral; EUR/JPY: Bearish; GBP/JPY: Bullish
      • Domestic: Relative ECB-BoE, ECB-BoJ, BoE-BoJ policy and yields drive crosses.
      • Cross: DXY influence / overall risk sentiment / correlation dynamics
      • Levels: Monitor respective supports/resistances closely on cross charts
    • XAU (Gold):
      • Direction: Bullish
      • Domestic (asset-specific): Real yields stabilizing / Breakevens rising / Safe haven demand
      • Cross: DXY weakness / risk appetite
      • Levels: Support $4540, Resistance $4570
    • XAG (Silver):
      • Direction: Neutral
      • Domestic (asset-specific): Industrial demand / Gold-Silver ratio watch
      • Cross: DXY weakness / risk appetite
      • Levels: Support $TBD, Resistance $TBD
    • WTI / Brent:
      • Direction: Bullish
      • Domestic (asset-specific): EIA Inventory impact / OPEC / geopolitical premium
      • Cross: DXY strength / risk aversion from supply shock
      • Levels: Support WTI $110.50, Resistance WTI $113.50
    • Copper:
      • Direction: Neutral
      • Domestic (asset-specific): China stimulus / inventories low / supply concerns
      • Cross: Global growth proxy / DXY strength
      • Levels: Support TBD, Resistance TBD
    • SPX:
      • Direction: Neutral
      • Domestic (US): Earnings season / Fed watching / US yields stable
      • Cross: VIX regime / global backdrop
      • Levels: Futures support 5290, resistance 5320
    • NDX:
      • Direction: Neutral
      • Domestic (US): Mega-cap performance / real yields / AI momentum
      • Cross: Rates sensitivity / VIX stability
      • Levels: Support TBD, Resistance TBD
    • US30 (Dow):
      • Direction: Neutral
      • Domestic (US): Industrial earnings / cyclical sentiment
      • Cross: Bond yield reaction
      • Levels: Support TBD, Resistance TBD
    • UK100 (FTSE):
      • Direction: Neutral
      • Domestic (UK): Sterling influence / Gilt yields / commodity mix
      • Cross: Global risk / US tone
      • Levels: Support TBD, Resistance TBD
    • DAX:
      • Direction: Neutral
      • Domestic (DE): Bund yields / IFO watch / EU sentiment
      • Cross: US tech influence / DXY direction / risk tone
      • Levels: Support TBD, Resistance TBD
    • Nikkei:
      • Direction: Neutral
      • Domestic (JP): JPY level / JGB yields / BoJ anticipation
      • Cross: US tech / risk regime
      • Levels: Support TBD, Resistance TBD
    • BTC:
      • Direction: Neutral
      • Domestic (asset-specific): Funding rate / ETF flow / on-chain signals
      • Cross: DXY / risk regime / Nasdaq correlation
      • Levels: Support TBD, Resistance TBD

    Positioning watch: Crowded shorts exist in JPY (4th percentile) and GBP (15th percentile), while crowded longs are in AUD (98th percentile), Copper (96th percentile), and Bitcoin (90th percentile). A positive surprise in UK or Japanese data could trigger a short squeeze in their respective currencies, while disappointment in China data could hurt AUD and Copper.

    The pain trade: A sustained break above 157.50 in USD/JPY, fueled by hawkish Fed commentary, would squeeze crowded JPY shorts and trigger broader risk-off flows.

  • Cable Rides Gilt Curve Steepening – Monday, 25 May

    Where we are: GBP/USD is trading around 1.2715, testing the upper end of its recent range. Overnight, Cable held a tight 1.2680-1.2720 range, and currently sits about 20 pips above Friday’s New York close. The 1.2750 level remains a key technical hurdle, with strong resistance expected there.

    What’s driving it: Sterling is finding support from a steepening gilt curve as markets continue to digest the latest UK inflation data. While the headline CPI figures showed welcome moderation, the persistence of services inflation and resilient wage growth are keeping the Bank of England in a hawkish holding pattern for now. This is manifesting as increased steepening in the gilt curve. Any further hawkish re-pricing in Gilts would push Cable higher; conversely, a dovish tilt would present downside risk. The rise in US 10Y Real Yields to 2.18% offers limited headwind to the Pound given the relatively higher yields available in the UK and the ongoing hawkish stance of the BOE.

    • BoE vote split 8-1 underscores the MPC’s reluctance to cut rates prematurely, a signal markets may be underpricing
    • The 2s10s gilt spread steepened by 6bp on Friday, reflecting expectations for delayed BoE easing.
    • Crowded GBP shorts (15th %ile) leave Cable vulnerable to a squeeze on any positive surprises.

    NY session focus: There are no major UK data releases scheduled today, so Cable will likely trade with a US-centric bias, particularly around risk sentiment and dollar flows. Watch for movement in US Treasury yields and the DXY for cues. Key levels to watch are 1.2680 as initial support and 1.2750 as resistance. The squeeze on GBP shorts remains a compelling trade, but a break below 1.2650 would invalidate the near term bullish thesis. The pain trade is a decisive break above 1.2750, triggering a wave of short covering.

  • NY Session Tactical Brief – Friday, 22 May

    Regime: Mixed — VIX steady at 17.44 despite higher oil and Dow futures, indicating risk appetite remains selective and rate-sensitive.

    Today’s market themes:

    • USD Strength: DXY supported by relatively hawkish Fed pricing.
    • Oil Volatility: Geopolitical tensions and inventory concerns drive swings.
    • Data Dependence: Retail sales releases in GBP and CAD in focus.

    The setup: USD strength continues, fueled by hawkish Fed bets as US yields remain elevated. Traders eye the 1.1600 level on EUR/USD; a break could trigger further downside. Focus remains on incoming data and any further escalation of geopolitical tensions in the Middle East.

    Watch list (native time per event):

    • 07:00 BST GBP: Retail Sales m/m (forecast -0.6%, prior 0.7%)
    • 08:30 ET CAD: Retail Sales m/m (forecast 0.6%, prior 0.7%)
    • 10:00 ET USD: Revised UoM Consumer Sentiment (forecast 48.2, prior 48.2)

    Bias by asset:

    STRICT SILO RULE: For every non-USD asset, the Domestic line MUST contain only domestic content (home central bank / domestic data / domestic yield / domestic political-fiscal driver). USD, DXY, Fed, US yields, and risk regime go in the Cross line — never in Domestic. If no fresh domestic catalyst exists, write “No fresh domestic catalyst — sensitive to US response” in Domestic. For commodities, Domestic = real-yields / supply / inventories / flows. For BTC, Domestic = funding / ETF flow / on-chain.

    • DXY:
      • Direction: Neutral
      • Domestic (US): Fed pricing stable / economic resilience
      • Cross: Global growth worries / safe-haven bids on tension
      • Levels: Support 99.00 / Resistance 99.50
    • EUR/USD:
      • Direction: Bearish
      • Domestic (EU): No fresh domestic catalyst — sensitive to US response
      • Cross: DXY strength / rate divergence / risk-off flows
      • Levels: Support 1.1600 / Resistance 1.1650
    • GBP/USD (Cable):
      • Direction: Neutral
      • Domestic (UK): Disappointing retail sales weigh on GBP
      • Cross: DXY strength / US-UK yield spreads / risk sentiment
      • Levels: Support 1.3380 / Resistance 1.3450
    • USD/JPY:
      • Direction: Bullish
      • Domestic (JP): Intervention risk high / BoJ dovish
      • Cross: US yields / risk-on / DXY strength
      • Levels: Support 158.50 / Resistance 159.50
    • USD/CAD (Loonie):
      • Direction: Bullish
      • Domestic (CA): No fresh domestic catalyst — sensitive to US response
      • Cross: DXY strength / WTI volatility / US-CA spread
      • Levels: Support 1.3600 / Resistance 1.3700
    • AUD/USD (Aussie):
      • Direction: Bearish
      • Domestic (AU): Surprise unemployment rise weighs on Aussie
      • Cross: DXY strength / China growth / commodity prices
      • Levels: Support 0.6600 / Resistance 0.6650
    • NZD/USD (Kiwi):
      • Direction: Bearish
      • Domestic (NZ): No fresh domestic catalyst — sensitive to US response
      • Cross: DXY strength / risk aversion / US-NZ yield spreads
      • Levels: Support 0.5850 / Resistance 0.5900
    • USD/CHF (Swissy):
      • Direction: Bullish
      • Domestic (CH): No fresh domestic catalyst — sensitive to US response
      • Cross: DXY strength / safe-haven demand eases
      • Levels: Support 0.7800 / Resistance 0.7900
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP neutral, EUR/JPY bullish, GBP/JPY bearish
      • Domestic: BoE vs ECB / BoJ, relative yield spreads / economic data
      • Cross: DXY / risk aversion / cross-of-crosses dynamic
      • Levels: Monitor for breakout patterns
    • XAU (Gold):
      • Direction: Bullish
      • Domestic (asset-specific): Real yields down / safe-haven bids
      • Cross: DXY weaker / risk aversion
      • Levels: Support $4500 / Resistance $4550
    • XAG (Silver):
      • Direction: Neutral
      • Domestic (asset-specific): Industrial demand / Gold-Silver ratio
      • Cross: DXY / risk appetite
      • Levels: Support $29.50 / Resistance $30.00
    • WTI / Brent:
      • Direction: Bullish
      • Domestic (asset-specific): Refinery attack / supply concerns
      • Cross: DXY / risk appetite
      • Levels: Support $108 / Resistance $115
    • Copper:
      • Direction: Neutral
      • Domestic (asset-specific): China stimulus hope/ LME stocks
      • Cross: DXY / global growth
      • Levels: Support $5.00 / Resistance $5.10
    • SPX:
      • Direction: Bullish
      • Domestic (US): Better earnings / Rate cut expectations
      • Cross: Steady VIX / Global sentiment
      • Levels: Futures support 5280 / Resistance 5320
    • NDX:
      • Direction: Bullish
      • Domestic (US): Mega-cap tech / Yield sensitivities
      • Cross: rates sensitivity / VIX
      • Levels: Support 19700 / Resistance 19900
    • US30 (Dow):
      • Direction: Bullish
      • Domestic (US): Industrial activity / Positive earnings
      • Cross: Bond yield reaction
      • Levels: Support 39500 / Resistance 40000
    • UK100 (FTSE):
      • Direction: Neutral
      • Domestic (UK): Weak pound / commodity-heavy mix
      • Cross: global risk / US tone
      • Levels: Support 10400 / Resistance 10500
    • DAX:
      • Direction: Bullish
      • Domestic (DE): Bund yields stable / EU confidence
      • Cross: US tech/ DXY / risk-on
      • Levels: Support 24700 / Resistance 24900
    • Nikkei:
      • Direction: Bullish
      • Domestic (JP): JPY weakness / BoJ policy
      • Cross: US Tech / risk sentiment
      • Levels: Support 63000 / Resistance 63500
    • BTC:
      • Direction: Neutral
      • Domestic (asset-specific): ETF inflows / funding rates
      • Cross: DXY / risk regime / Nasdaq correlation
      • Levels: Support $67500 / Resistance $68500

    Positioning watch: AUD and Copper are crowded long (>98th percentile), leaving them vulnerable to a squeeze lower on weaker China data or disappointing earnings. Nasdaq is crowded short (<0th percentile) and ripe for a rally if yields soften further.

    The pain trade: A sharp rally in the Nasdaq fueled by falling real yields would squeeze crowded shorts and force further buying, pushing indices higher.

  • Cable Pressured by Soft Retail Sales – Friday, 22 May

    Where we are: GBP/USD is currently trading around 1.3405, pressured after disappointing domestic data. The pair traded in a tight overnight range of 1.3400-1.3430. This is below yesterday’s New York close around 1.3420, suggesting the intraday bias is bearish. Key support lies at 1.3370, with resistance around 1.3450.

    What’s driving it: Sterling is on the back foot this morning following a significantly weaker-than-expected UK Retail Sales print, which came in at -0.6% m/m versus a forecast of -0.6%. This reinforces concerns of slowing UK economic activity, adding to earlier data suggesting a cooling labor market and contraction in private sector activity. These concerns, coupled with the Bank of England’s cautious and data-dependent stance, are weighing on rate hike expectations. US yields are retreating from recent highs, but the dominant intraday driver remains domestic.

    • UK Retail Sales printed -0.6% m/m, missing expectations and highlighting consumer weakness.
    • FT Markets reports gilt relief rally sending yields to biggest weekly drop since 2024 as Burnham pledge to stick to fiscal rules and pullback from bets on higher BoE interest rates drive rebound.
    • CFTC data shows moderate short positioning in GBP, leaving some room for further downside.

    NY session focus: The main event for the NY session will be the Revised UoM Consumer Sentiment release at 10:00 ET. While technically a USD driver, given the soft UK retail sales, any downside surprise could amplify Sterling weakness. Key levels to watch are 1.3370 on the downside and 1.3450 on the upside. The trade that’s working is fading Cable rallies. The trade at risk is a short squeeze if US data significantly disappoints and risk sentiment improves sharply, though BoE caution is a headwind. The pain trade is a sustained break above 1.3450, fueled by a dovish repricing of the BoE.

  • NY Session Tactical Brief – Thursday, 21 May

    Regime: Risk-off, fueled by rising real yields and renewed Iran tensions, with VIX at 18.06 and DXY bid.

    Today’s market themes:

    • Oil shock revival: Geopolitical tensions around Iran exacerbate supply concerns, driving crude higher.
    • Rates repricing: Dimon’s hawkish comments reinforce the potential for higher-for-longer, lifting Treasury yields.
    • Mixed PMI signals: Eurozone and UK PMIs offer a mixed bag, with services sector weakness raising growth concerns.

    The setup: Renewed geopolitical risks are stoking inflation fears and pushing real yields higher, putting pressure on risk assets. Look for opportunities to fade rallies in equities, especially tech. Watch the 10Y real yield at 2.18% as a key level. Initial weakness in Dow futures around 39,850 offers a possible short entry.

    Watch list (native time per event):

    • 11:30 AEST AUD: Employment Change (forecast 16.7K, prior 17.9K)
    • 09:15 CET EUR: French Flash Manufacturing PMI (forecast 52.1, prior 52.8)
    • 09:30 London GBP: Flash Services PMI (forecast 51.7, prior 52.0)

    Bias by asset:

    • DXY:
      • Direction: Bullish
      • Domestic (US): Fed policy uncertainty, strong US yields
      • Cross: Risk-off sentiment, safe-haven demand
      • Levels: Resistance 119.50, support 119.00
    • EUR/USD:
      • Direction: Bearish
      • Domestic (EU): Weak Eurozone PMIs, ECB dovishness
      • Cross: Strong DXY, widening US-DE 10Y spread, risk-off flows
      • Levels: Resistance 1.1620, support 1.1580
    • GBP/USD (Cable):
      • Direction: Bearish
      • Domestic (UK): Mixed UK PMIs, uncertainty around BoE path
      • Cross: Strong DXY, US-UK 10Y spread, risk aversion
      • Levels: Resistance 1.2660, support 1.2600
    • USD/JPY:
      • Direction: Neutral
      • Domestic (JP): BoJ caution, intervention risk remains high
      • Cross: Rising US 10Y yields, DXY strength, risk sentiment
      • Levels: Resistance 159.50, support 159.00
    • USD/CAD (Loonie):
      • Direction: Bullish
      • Domestic (CA): BoC cautious tone, WTI volatility
      • Cross: Strong DXY, US-CA 10Y spread
      • Levels: Resistance 1.3820, support 1.3750
    • AUD/USD (Aussie):
      • Direction: Bearish
      • Domestic (AU): Mixed labour data, RBA tightening path uncertain
      • Cross: Strong DXY, US-AU 10Y spread, China growth concerns
      • Levels: Resistance 0.6680, support 0.6620
    • NZD/USD (Kiwi):
      • Direction: Bearish
      • Domestic (NZ): RBNZ easing bias
      • Cross: Strong DXY, US-NZ 10Y spread, risk-off sentiment
      • Levels: Resistance 0.5900, support 0.5850
    • USD/CHF (Swissy):
      • Direction: Bullish
      • Domestic (CH): SNB dovishness, Swiss yields lagging
      • Cross: Strong DXY, safe-haven demand
      • Levels: Resistance 0.7900, support 0.7850
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: Neutral; EUR/JPY: Bearish; GBP/JPY: Bearish
      • Domestic: Relative ECB/BoE/BoJ stance, relative yields
      • Cross: DXY, risk regime, cross-of-crosses dynamics
      • Levels: Monitor key supports/resistances on charts
    • XAU (Gold):
      • Direction: Bearish
      • Domestic (asset-specific): Rising real yields, CB demand waning
      • Cross: Strong DXY, risk aversion not fully supportive
      • Levels: Resistance $4,510, support $4,480
    • XAG (Silver):
      • Direction: Bearish
      • Domestic (asset-specific): Slower industrial demand growth
      • Cross: Strong DXY, risk-off sentiment
      • Levels: Follow Gold
    • WTI / Brent:
      • Direction: Bullish
      • Domestic (asset-specific): Iran tensions / potential supply disruption
      • Cross: DXY offsetting factor, risk-off a moderate headwind
      • Levels: WTI Resistance $102, Support $98
    • Copper:
      • Direction: Bearish
      • Domestic (asset-specific): China growth concerns, LME inventories stable
      • Cross: Strong DXY, global growth proxy
      • Levels: Follow market trend, trade in accordance with real yields.
    • SPX:
      • Direction: Bearish
      • Domestic (US): Rising yields, earnings headwinds
      • Cross: Elevated VIX, global risk-off
      • Levels: Futures resistance 5300, cash support 5250
    • NDX:
      • Direction: Bearish
      • Domestic (US): Real yield sensitivity, mixed earnings
      • Cross: Rates sensitivity, elevated VIX
      • Levels: Follow SPX general resistance and support level
    • US30 (Dow):
      • Direction: Bearish
      • Domestic (US): Cyclical headwinds, rising yields
      • Cross: Bond-yield reaction
      • Levels: Follow SPX general resistance and support level
    • UK100 (FTSE):
      • Direction: Neutral
      • Domestic (UK): Sterling strength, mixed PMI data, commodity exposure
      • Cross: Global risk, US tone
      • Levels: Resistance 10,400, support 10,350
    • DAX:
      • Direction: Bearish
      • Domestic (DE): Weak German PMIs, Bund yield increase
      • Cross: US tech, DXY, risk-off
      • Levels: Resistance is high, monitor yield trend
    • Nikkei:
      • Direction: Neutral
      • Domestic (JP): Cautious BOJ commentary, JGB yield focus
      • Cross: US tech reaction, global risk
      • Levels: Follow global risk sentiment
    • BTC:
      • Direction: Neutral
      • Domestic (asset-specific): ETF flows slowing, funding rates stable
      • Cross: DXY strength, risk-off, Nasdaq correlation
      • Levels: Resistance $68,000, support $67,500

    Positioning watch: AUD, Copper, and US Dollar are crowded longs (>80th percentile), creating squeeze risk on any positive surprises or a shift in sentiment. Nasdaq 100 and Japanese Yen are crowded shorts (<20th percentile), risking a sharp rally on positive catalysts.

    The pain trade: A dovish pivot from a Fed speaker today would trigger a violent short squeeze in Nasdaq and Yen, simultaneously undermining the DXY.

  • Pound Weakness to Persist on Growth Concerns – Thursday, 21 May

    Where we are: Cable currently trades at 1.2635, consolidating near the bottom of its recent range. Overnight, GBP/USD oscillated between 1.2620 and 1.2670. This level is significantly below yesterday’s NY close of 1.2680 and the pair remains under pressure, struggling to gain traction above the 1.2650 mark. Technicals suggest further downside risk, with limited support until 1.2580.

    What’s driving it: Sterling is under pressure this morning following a concerning slowdown in UK economic activity. Today’s Flash PMI data at 09:30 BST are expected to confirm this cooling, with both manufacturing and services sectors projected to show a slowdown; manufacturing is expected to print 52.9 (prior 53.6) while services are expected to drop to 51.7 (prior 52.0). This comes on the heels of recent data showing April inflation undershooting expectations and the labour market unexpectedly softening, reinforcing the view that the BoE may be hesitant to tighten policy aggressively. This contrasts with a still-hawkish priced US curve, sending real-rate differentials in favour of the Dollar.

    • The MPC’s current cautious, data-dependent bias, underscored by the 8-1 vote split at the last meeting, leaves Sterling vulnerable to downside surprises.
    • Speculative positioning in GBP remains moderately short, but has increased in net length in the latest week, leaving room for further short build if the incoming data continues to disappoint.
    • Rob Wood at Pantheon Macroeconomics notes that a sharp downturn in output means the Bank of England is more likely to hold interest rates in July, as mentioned in a Guardian Business article.

    NY session focus: Traders will be closely watching the 08:30 ET release of the Philly Fed Manufacturing Index and Unemployment Claims for further clues on the US economic outlook, which will likely impact DXY and indirectly affect Cable. BoE Gov Bailey’s speech at 16:00 BST will also be closely scrutinised for any shift in tone or forward guidance. Key levels to watch are 1.2600 for a potential break lower and 1.2680 as immediate resistance. The short GBP/USD trade remains favoured, while long positions are at risk. The pain trade would be a surprisingly hawkish tone from Bailey after a beat on the US data, triggering a rapid short squeeze.

  • NY Session Tactical Brief – Wednesday, 20 May

    Regime: Mixed — the VIX at 17.82 suggests a moderately risk-on environment, but rising US 10Y real yields near 2.13% offset the positive sentiment.

    Today’s market themes:

    • FOMC Minutes: focus on the Fed’s inflation outlook and rate-cut timeline.
    • Iran tensions: geopolitical risks weigh on oil and broader sentiment.
    • Nvidia earnings: potential market catalyst, could affirm rally or spur correction.

    The setup: All eyes on the FOMC Minutes at 2 PM ET. The market is pricing in minimal rate cuts this year. Hawkish surprises in the minutes could strengthen the dollar and pressure risk assets. A dovish surprise could weaken the dollar and boost stocks and bonds. Watch the 2Y yield for reaction.

    Watch list (native time per event):

    • 07:00 London [High] GBP: CPI y/y (forecast 3.0%, prior 3.3%)
    • 11:30 AEST [High] AUD: Employment Change (forecast 16.7K, prior 17.9K)
    • 14:00 ET [High] USD: FOMC Meeting Minutes

    Bias by asset:

    • DXY:
      • Direction: Neutral.
      • Domestic (US): FOMC minutes could provide hawkish catalysts.
      • Cross: Risk sentiment shifts amid Nvidia earnings anticipation.
      • Levels: Support at 119.00; resistance at 119.50.
    • EUR/USD:
      • Direction: Bearish.
      • Domestic (EU): No fresh domestic catalyst — sensitive to US response.
      • Cross: DXY strength and rising US yields pressure the pair.
      • Levels: Resistance at 1.0830; support at 1.0780.
    • GBP/USD (Cable):
      • Direction: Neutral.
      • Domestic (UK): CPI miss fueled gilt buying – focus on MPC hearings.
      • Cross: DXY strength and risk appetite weigh on cable.
      • Levels: Resistance at 1.2700; support at 1.2650.
    • USD/JPY:
      • Direction: Bullish.
      • Domestic (JP): BoJ dovish stance and weak wage data.
      • Cross: US 10Y yield strength and DXY provide tailwinds.
      • Levels: Support at 158.50; resistance at 160.00.
    • USD/CAD (Loonie):
      • Direction: Bullish.
      • Domestic (CA): BoC cautious outlook and weak CPI.
      • Cross: DXY strength and weaker oil prices pressure CAD.
      • Levels: Support at 1.3750; resistance at 1.3800.
    • AUD/USD (Aussie):
      • Direction: Bearish.
      • Domestic (AU): RBA cautious stance on inflation. Employment data in focus.
      • Cross: DXY strength and China growth concerns weigh.
      • Levels: Resistance at 0.6700; support at 0.6630.
    • NZD/USD (Kiwi):
      • Direction: Bearish.
      • Domestic (NZ): RBNZ dovish stance after recent meetings.
      • Cross: DXY strength and risk-off sentiment impact the Kiwi.
      • Levels: Resistance at 0.5860; support at 0.5800.
    • USD/CHF (Swissy):
      • Direction: Bullish.
      • Domestic (CH): SNB easing bias supports USD/CHF upside.
      • Cross: DXY strength and risk-off flows support pair.
      • Levels: Support at 0.7850; resistance at 0.7950.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP Bearish, EUR/JPY Bullish, GBP/JPY Bullish.
      • Domestic: Relative CB policy (BoE more hawkish than ECB; BoJ more dovish).
      • Cross: DXY strength weighing on EUR/GBP; risk-on supporting JPY crosses.
      • Levels: EUR/GBP: 0.8480/0.8530; EUR/JPY: 170.00/171.00; GBP/JPY: 193.50/194.50.
    • XAU (Gold):
      • Direction: Bearish.
      • Domestic (asset-specific): Rising real yields increase the opportunity cost.
      • Cross: DXY strength weighs on Gold.
      • Levels: Resistance at $4,480/oz; support at $4,450/oz.
    • XAG (Silver):
      • Direction: Bearish.
      • Domestic (asset-specific): Weaker industrial demand prospects.
      • Cross: DXY strength and risk-off environment are headwinds.
      • Levels: Resistance at $32.00/oz; support at $31.50/oz.
    • WTI / Brent:
      • Direction: Neutral.
      • Domestic (asset-specific): Iran talks and Ukraine refinery attack priced in.
      • Cross: DXY strength and mixed risk sentiment.
      • Levels: WTI: $100/$103; Brent: $108/$111.
    • Copper:
      • Direction: Neutral.
      • Domestic (asset-specific): Wait for new China catalyst to lift LME stocks.
      • Cross: DXY and global growth prospects.
      • Levels: Resistance at $5.15; support at $5.00.
    • SPX:
      • Direction: Neutral.
      • Domestic (US): Earnings season nearing end; Fed policy key.
      • Cross: VIX stable, global sentiment depends on Nvidia.
      • Levels: Futures 5300/5340; cash support 5280/5320.
    • NDX:
      • Direction: Neutral.
      • Domestic (US): Nvidia earnings key; real yield reaction impacts valuation.
      • Cross: Rates sensitivity and VIX.
      • Levels: 19250/19450.
    • US30 (Dow):
      • Direction: Neutral.
      • Domestic (US): Awaiting for more industrials to show positive earnings.
      • Cross: Bond-yield reaction to FOMC minutes.
      • Levels: 39700/39900.
    • UK100 (FTSE):
      • Direction: Neutral.
      • Domestic (UK): Sterling swings impacting export-heavy index.
      • Cross: Global risk and US tone.
      • Levels: 10200/10300.
    • DAX:
      • Direction: Neutral.
      • Domestic (DE): No fresh domestic catalyst — sensitive to US response.
      • Cross: US tech and DXY.
      • Levels: 24300/24500.
    • Nikkei:
      • Direction: Neutral.
      • Domestic (JP): JPY weakness continues, JGB yields drive sentiment.
      • Cross: US tech and risk regime.
      • Levels: 59500/60000.
    • BTC:
      • Direction: Neutral.
      • Domestic (asset-specific): ETF flows holding steady, no major funding stress.
      • Cross: DXY and risk sentiment influencing Bitcoin’s price action.
      • Levels: 65000/68000.

    Positioning watch: Crowded longs in AUD and Copper (98th percentile) and crowded shorts in Nasdaq (0th percentile) and JPY (8th percentile) suggest squeeze risks if data improves or Fed turns dovish. Dollar long also extended (85th %ile) exposes downside on risk-on turn.

    The pain trade: A dovish surprise in the FOMC minutes would trigger a short squeeze in Nasdaq, fuel a rally in beaten-down gold, and weaken the dollar, hurting those positioned for higher rates.

  • Pound Recovers as UK Inflation Undershoots Expectations – Wednesday, 20 May

    Where we are: Cable is currently trading around 1.2680, recovering from overnight lows near 1.2650. The pair is oscillating above the 1.2670 level, which marks the 50-day moving average. This is a significant improvement versus Friday’s close, fuelled by today’s domestic CPI print, but remains well below the multi-month highs of 1.2740 seen last week.

    What’s driving it: The primary driver for Sterling today is the cooler-than-expected UK inflation data. April’s CPI came in at 2.8% year-on-year, below both the forecast of 3.0% and the previous reading of 3.3%, triggering a paring back of BOE rate-hike expectations, and prompting a jump in Gilts. The market is now pricing in just two rate hikes by December. However, despite the dovish repricing, the Pound has staged a notable recovery reflecting a sentiment that the UK economy may have sufficient headroom to manage a slightly less restrictive monetary policy.

    • UK CPI undershooting expectations at 2.8% YoY, the lowest since March 2025.
    • Gilt yields sharply down on the back of the inflation print, as traders reassess the Bank of England’s policy path.
    • CFTC data showing a moderately short Sterling position (-43,059 contracts) suggests limited room for further downside, potentially squeezing shorts.

    NY session focus: The main event for the US session will be the release of the FOMC meeting minutes at 14:00 ET. While the minutes are likely to be backward-looking, any hawkish surprises could put downward pressure on Cable. Key levels to watch are resistance around 1.2700 and support at 1.2650. The short Sterling trade is now vulnerable to a squeeze. The pain trade is likely a rally through 1.2700, forcing shorts to cover and potentially testing higher levels towards 1.2750.

  • NY Session Tactical Brief – Tuesday, 19 May

    Regime: Mixed — VIX at 18.43 signals ongoing unease, but rising US yields underpin USD strength, offsetting risk aversion.

    Today’s market themes:

    • USD dominance: Rising US yields and safe-haven demand continue to buoy the Dollar across the board.
    • Inflation watch: Canadian CPI data offers key test for BoC rate-cut expectations.
    • Positioning unwind: Crowded longs in AUD and Copper face disappointment risk from China slowdown fears.

    The setup: The market is pricing in a hawkish Fed, driving the USD higher, with USD/JPY approaching multi-decade highs near 159.15. The trade is to fade crowded shorts in Nasdaq and Yen while selling AUD on weak data. The risk is a surprise dovish signal from the Fed, triggering a rapid unwinding of USD longs.

    Watch list (native time per event):

    • 11:30 AEST AUD: Monetary Policy Meeting Minutes
    • 08:30 ET CAD: CPI m/m (forecast 0.7%, prior 0.9%)
    • 10:00 ET USD: Pending Home Sales m/m (forecast 1.0%, prior 1.5%)

    Bias by asset:

    • DXY:
      • Direction: Higher
      • Domestic (US): US yields climbing; hawkish Fed repricing.
      • Cross: Safe-haven demand, global uncertainty boosting USD.
      • Levels: Support 119.00, Resistance 119.50.
    • EUR/USD:
      • Direction: Lower
      • Domestic (EU): Dovish ECB outlook weighing on the Euro.
      • Cross: DXY strength, US-DE 10Y widening.
      • Levels: Support 1.1600, Resistance 1.1700.
    • GBP/USD (Cable):
      • Direction: Lower
      • Domestic (UK): BoE reluctance, claimant count.
      • Cross: DXY strength, risk off sentiment, US-UK 10Y.
      • Levels: Support 1.2450, Resistance 1.2550.
    • USD/JPY:
      • Direction: Higher
      • Domestic (JP): BoJ remains dovish; intervention risk grows.
      • Cross: US 10Y surging, DXY strength amplifying the move.
      • Levels: Support 158.50, Resistance 160.00.
    • USD/CAD (Loonie):
      • Direction: Higher
      • Domestic (CA): CPI miss will trigger BOC dovish repricing.
      • Cross: DXY strength, watching US-CA 10Y spread.
      • Levels: Support 1.3700, Resistance 1.3750.
    • AUD/USD (Aussie):
      • Direction: Lower
      • Domestic (AU): RBA cautious, meeting minutes confirm dovish stance.
      • Cross: DXY strength, China growth concerns.
      • Levels: Support 0.6600, Resistance 0.6650.
    • NZD/USD (Kiwi):
      • Direction: Lower
      • Domestic (NZ): RBNZ easing bias entrenched.
      • Cross: DXY strength, risk aversion.
      • Levels: Support 0.5800, Resistance 0.5850.
    • USD/CHF (Swissy):
      • Direction: Higher
      • Domestic (CH): No fresh domestic catalyst — sensitive to US response
      • Cross: DXY strength, safe-haven flows supporting.
      • Levels: Support 0.7850, Resistance 0.7900.
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: sideways, EUR/JPY: higher, GBP/JPY: higher
      • Domestic: Relative hawkish BoE to ECB; JPY still dovish.
      • Cross: DXY strength, risk aversion affecting the crosses.
      • Levels: EUR/GBP: 0.8500-0.8550, EUR/JPY: 170.00-171.00, GBP/JPY: 193.50-194.50.
    • XAU (Gold):
      • Direction: Lower
      • Domestic (asset-specific): Rising real yields weighing on gold.
      • Cross: DXY strength.
      • Levels: Support $4,520, Resistance $4,560.
    • XAG (Silver):
      • Direction: Lower
      • Domestic (asset-specific): Industrial demand mixed, gold ratio flat.
      • Cross: DXY strength, risk aversion.
      • Levels: Support $31.00, Resistance $32.00.
    • WTI / Brent:
      • Direction: Sideways
      • Domestic (asset-specific): US-Iran talks weighing.
      • Cross: DXY strength, risk aversion muted.
      • Levels: WTI: $100-103, Brent: $108-112.
    • Copper:
      • Direction: Lower
      • Domestic (asset-specific): China growth worries, LME stock build.
      • Cross: DXY strength, global growth proxy weak.
      • Levels: Support $4.80, Resistance $4.90.
    • SPX:
      • Direction: Lower
      • Domestic (US): Rising yields, earnings season fades.
      • Cross: Elevated VIX, global risk concerns.
      • Levels: Futures support 5280, resistance 5300.
    • NDX:
      • Direction: Lower
      • Domestic (US): Rising real yields pressuring valuations.
      • Cross: Rate sensitivity elevated, VIX concerns.
      • Levels: Support 19,300, Resistance 19,400.
    • US30 (Dow):
      • Direction: Lower
      • Domestic (US): Earnings less supportive, cyclicals under pressure.
      • Cross: Bond yield reaction negative.
      • Levels: Support 39,800, Resistance 40,000.
    • UK100 (FTSE):
      • Direction: Sideways
      • Domestic (UK): Sterling strength offsetting global weakness.
      • Cross: Global risk tone, US weakness.
      • Levels: Support 8,350, Resistance 8,400.
    • DAX:
      • Direction: Sideways
      • Domestic (DE): German HICP eases, no bullish trigger.
      • Cross: US tech weakness, DXY strength.
      • Levels: Support 24,500, Resistance 24,600.
    • Nikkei:
      • Direction: Lower
      • Domestic (JP): JPY weakness hurting profitability.
      • Cross: US tech weak; no clear up catalyst.
      • Levels: Support 60,000, Resistance 61,000.
    • BTC:
      • Direction: Sideways
      • Domestic (asset-specific): ETF flow slowing, mixed on-chain data.
      • Cross: DXY strength, Nasdaq correlation weighing.
      • Levels: Support $66,000, Resistance $67,000.

    Positioning watch: Crowded longs in AUD (98th percentile) and Copper (98th percentile) expose these assets to significant downside risk if China economic data disappoints or trade tensions escalate. Crowded shorts in Nasdaq (0th percentile) face a squeeze risk if yields drop.

    The pain trade: A surprise dovish turn by the Fed, sparked by weak US data, would trigger a rapid unwinding of USD longs and a rally in equities, catching crowded shorts offside.

  • Cable Remains Under Pressure Amid Mixed UK Data – Tuesday, 19 May

    Where we are: GBP/USD is currently trading around 1.2485, consolidating losses from the overnight session. The pair traded in a tight range overnight, failing to break above 1.2510 resistance. The price sits well below the prior NY close of 1.2520, reflecting the ongoing bearish sentiment.

    What’s driving it: Sterling remains on the defensive after this morning’s mixed bag of UK data. While the Claimant Count Change came in slightly below expectations at 23.1K, signalling some tightness in the labour market, the Average Earnings Index held steady at 3.8%, failing to provide the dovish signal the BoE needs to justify a rate cut. The persistent stickiness of wages keeps the MPC in a holding pattern, as highlighted by the 8-1 vote at the last meeting where Dhingra dissented for a cut. Hawkish repricing in US yields is adding further pressure to Sterling as the 2-year yield sits above 4.09%.

    • BoE Governor Bailey has repeatedly stressed the importance of services CPI in determining the future path of monetary policy, placing increased scrutiny on upcoming inflation releases.
    • CFTC data shows net non-commercial GBP positions remain moderately short, but at the 35th percentile for the year, there is little risk of an imminent short squeeze.
    • Worries on gilts, rising public debt, and increased hedge fund activity have sparked some vulnerabilities in the bond market, as reported by the FT.

    NY session focus: The market will be closely watching the 10:00 ET release of US Pending Home Sales m/m, with expectations of a 1.0% increase. A strong print could further fuel dollar strength and pressure Cable lower, potentially testing support around 1.2450. Resistance remains around 1.2510. The current trade is short Cable on rallies toward 1.2500, while longs are at risk until we see a clear dovish shift from the BoE or a significant reversal in US yields. The pain trade for GBP/USD is a surprise downside print in US data that triggers a sharp dollar selloff and allows Cable to break above 1.2550.

  • NY Session Tactical Brief – Monday, 18 May

    Regime: Risk-off, driven by rising real yields as 10Y TIPS push above 2% and oil climbs to $105, pressuring equities.

    Today’s market themes:

    • Real-yield repricing and inflation fears weighing on risk assets.
    • Geopolitical tensions in Middle East adding to oil supply concerns.
    • Watch for signs of USD/JPY intervention as pair tests 159.

    The setup: Rising real yields are the dominant driver, pressuring risk assets. Focus on the US 10Y TIPS yield, currently at 2%, as it sets the tone. A break above 2.1% could trigger further equity sell-off and dollar strength. Trade: short SPX futures, stop above 5300. Risk: surprising dovish Fed commentary.

    Watch list (native time per event):

    • 08:30 ET US Retail Sales (m/m) Forecast: 0.4%, Prior: 0.7%
    • 10:00 ET US NAHB Housing Market Index Prior: 51
    • 11:00 CET ECB President Lagarde Speaks

    Bias by asset:

    • DXY:
      • Direction: Bullish
      • Domestic (US): Hawkish Fed rhetoric, rising US yields
      • Cross: Risk-off sentiment, safe-haven demand
      • Levels: Support 117.80 / Resistance 118.30
    • EUR/USD:
      • Direction: Bearish
      • Domestic (EU): Weak German data, dovish ECB comments
      • Cross: Stronger DXY, widening US-DE 10Y yield spread
      • Levels: Support 1.0800 / Resistance 1.0850
    • GBP/USD (Cable):
      • Direction: Bearish
      • Domestic (UK): Cautious BoE stance, weak data prints
      • Cross: Stronger DXY, risk-off flows
      • Levels: Support 1.2550 / Resistance 1.2620
    • USD/JPY:
      • Direction: Bullish
      • Domestic (JP): BoJ dovish, rising JGB yields, intervention watch
      • Cross: Rising US 10Y, DXY strength, risk-off
      • Levels: Support 158.50 / Resistance 159.00
    • USD/CAD (Loonie):
      • Direction: Bullish
      • Domestic (CA): BoC holds, CPI is soft, rangebound
      • Cross: Stronger DXY, US-CA 10Y spread widening
      • Levels: Support 1.3650 / Resistance 1.3700
    • AUD/USD (Aussie):
      • Direction: Bearish
      • Domestic (AU): Hawkish RBA stance but crowded long positioning
      • Cross: Stronger DXY, weaker China growth, US-AU spread
      • Levels: Support 0.7050 / Resistance 0.7120
    • NZD/USD (Kiwi):
      • Direction: Bearish
      • Domestic (NZ): RBNZ easing bias, weakening economic momentum
      • Cross: Stronger DXY, risk aversion, US-NZ yield divergence
      • Levels: Support 0.5800 / Resistance 0.5850
    • USD/CHF (Swissy):
      • Direction: Bullish
      • Domestic (CH): SNB neutral, CPI contained
      • Cross: DXY strength, safe-haven unwinding
      • Levels: Support 0.7800 / Resistance 0.7850
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP Neutral, EUR/JPY Bearish, GBP/JPY Neutral
      • Domestic: Diverging central bank policies, relative yield spreads
      • Cross: DXY strength, risk regime dynamics
      • Levels: EUR/GBP 0.8500-0.8550, EUR/JPY 169.50-170.50, GBP/JPY 192.00-193.00
    • XAU (Gold):
      • Direction: Bearish
      • Domestic (asset-specific): Rising real yields, soft CB demand
      • Cross: Stronger DXY, risk-off environment
      • Levels: Support $4,500 / Resistance $4,550
    • XAG (Silver):
      • Direction: Bearish
      • Domestic (asset-specific): Weaker industrial demand, high Gold-Silver ratio
      • Cross: Stronger DXY, risk aversion
      • Levels: Support $30.00 / Resistance $31.00
    • WTI / Brent:
      • Direction: Bullish
      • Domestic (asset-specific): Tight supply, geopolitics, rising demand
      • Cross: Risk-off, inflation hedge
      • Levels: WTI Support $100 / Resistance $105
    • Copper:
      • Direction: Bearish
      • Domestic (asset-specific): Weak China, rising LME stocks
      • Cross: DXY strength, global growth concerns
      • Levels: Support $5.00 / Resistance $5.10
    • SPX:
      • Direction: Bearish
      • Domestic (US): Rising yields, Fed outlook
      • Cross: VIX elevated, global risk-off
      • Levels: Futures 5285, support 5250, resistance 5300 cash
    • NDX:
      • Direction: Bearish
      • Domestic (US): Real yields pressure valuations
      • Cross: Rates sensitivity, VIX
      • Levels: Support 18,100 / Resistance 18,300
    • US30 (Dow):
      • Direction: Bearish
      • Domestic (US): Earnings cyclical concerns, yields
      • Cross: Bond-yield reaction
      • Levels: Support 39,700 / Resistance 40,000
    • UK100 (FTSE):
      • Direction: Neutral
      • Domestic (UK): Mixed data, Gilt yields
      • Cross: Global risk, US tone
      • Levels: Support 8,400 / Resistance 8,450
    • DAX:
      • Direction: Bearish
      • Domestic (DE): Weak German data, rising Bund yields
      • Cross: US tech, DXY, risk regime
      • Levels: Support 23,600 / Resistance 23,800
    • Nikkei:
      • Direction: Bearish
      • Domestic (JP): Strong JPY, rising JGB yields, BoJ stance
      • Cross: US tech, risk regime
      • Levels: Support 60,500 / Resistance 61,000
    • BTC:
      • Direction: Bearish
      • Domestic (asset-specific): ETF outflows
      • Cross: DXY, risk regime, Nasdaq correlation
      • Levels: Support $60,000 / Resistance $62,000

    Positioning watch: AUD and Copper are crowded long at >98th percentile, creating significant squeeze risk if US data surprises to the upside or China stimulus disappoints. Nasdaq is crowded short at the 0th percentile, vulnerable to a rally.

    The pain trade: A dovish surprise from a Fed speaker would ignite a risk rally, squeezing crowded short positions in Nasdaq and causing dollar weakness.

  • Cable Under Pressure as Political Risk Weighs – Monday, 18 May

    Where we are: GBP/USD is currently trading around 1.2585, testing the lower end of its recent range. Cable has traded in a tight overnight range of 1.2570-1.2610, and remains below Friday’s New York close of 1.2630. The pair is struggling to gain traction as political uncertainty and the potential for a less market-friendly government weigh on sentiment.

    What’s driving it: Sterling is under pressure due to rising political uncertainty surrounding the potential entry of Andy Burnham into the leadership race. The prospect of Burnham, perceived as less aligned with bond market interests, is fueling concerns among investors. Adding to the negative sentiment, gilt yields remain elevated, reflecting the market’s anxiety over future fiscal policy. The current cautious stance of the Bank of England, evidenced by the 8-1 vote to hold rates at 4.50% and the MPC’s data-dependent approach, provides little support for the Pound.

    • The potential leadership challenge from Andy Burnham is stoking fears of less market-friendly fiscal policies.
    • The Bank of England’s cautious stance, with one MPC member dissenting for a rate cut, is keeping a lid on Sterling gains.
    • CFTC data shows that net non-commercial GBP positioning is moderately short at -43,059 contracts, representing -15.2% of open interest — leaving Cable exposed to further downside.

    NY session focus: Traders will be closely monitoring any further developments in the UK political landscape for potential catalysts to push Sterling lower. Keep an eye on the US 2-year yield, currently at 4%, for signals of a broader risk-off move that could exacerbate GBP weakness. Support lies at 1.2550, with a break below opening the door to 1.2500. Resistance is at 1.2630, the prior NY close. The trade that’s working is fading Cable rallies. The trade at risk is chasing Cable lower without accounting for short positioning and potential for a squeeze. The pain trade is a coordinated global rates rally that catches GBP shorts off guard.

  • NY Session Tactical Brief – Friday, 15 May

    Regime: Risk-off, driven by rising oil prices and inflation worries spooking bond markets, pushing US 2Y yields to 3.98%.

    Today’s market themes:

    • Oil supply scare: Strait of Hormuz tensions driving WTI above $104, fueling inflation concerns.
    • Global bond selloff: Rising oil and inflation fears triggering broad-based bond yield increases.
    • USD strength: Dollar continues to rally on Fed hike expectations, nearing best week since March.

    The setup: Oil supply disruptions are the dominant driver, pushing inflation expectations higher and triggering a global bond selloff. The trade is to fade equity rallies, especially in growth names, as real yields rise. Risk is a de-escalation in Middle East tensions, sending oil and yields lower.

    Watch list (native time per event):

    • 08:30 ET US PPI (Prior: +0.2%)
    • 10:00 ET US University of Michigan Consumer Sentiment (Prior: 77.2)
    • 15:00 CET ECB’s Lagarde speaks

    Bias by asset:

    • DXY:
      • Direction: Bullish
      • Domestic (US): Hawkish Fed bets, resilient US data, rising US yields.
      • Cross: Global risk aversion, flight to safety, EUR/USD weakness.
      • Levels: Support 98.50, Resistance 99.50
    • EUR/USD:
      • Direction: Bearish
      • Domestic (EU): Dovish ECB, persistent inflation challenges, peripheral stress.
      • Cross: Strong DXY, widening US-DE 10Y yield spread, risk-off sentiment.
      • Levels: Support 1.1600, Resistance 1.1700
    • GBP/USD (Cable):
      • Direction: Bearish
      • Domestic (UK): BoE hawkishness priced in, potential for dovish repricing, Gilt underperformance.
      • Cross: Strong DXY, widening US-UK 10Y yield spread, risk aversion.
      • Levels: Support 1.3350, Resistance 1.3450
    • USD/JPY:
      • Direction: Neutral
      • Domestic (JP): BoJ remains dovish, intervention threat looms, JGBs constrained.
      • Cross: Rising US 10Y yield, strong DXY, risk aversion.
      • Levels: Support 157.50, Resistance 158.50
    • USD/CAD (Loonie):
      • Direction: Bullish
      • Domestic (CA): BoC’s cautious stance, CPI remains elevated, sensitive to oil price swings.
      • Cross: Strong DXY, widening US-CA 10Y yield spread.
      • Levels: Support 1.3650, Resistance 1.3750
    • AUD/USD (Aussie):
      • Direction: Bearish
      • Domestic (AU): RBA reluctance to tighten aggressively, iron ore price concerns.
      • Cross: Strong DXY, China slowdown fears, risk-off sentiment.
      • Levels: Support 0.7150, Resistance 0.7250
    • NZD/USD (Kiwi):
      • Direction: Bearish
      • Domestic (NZ): RBNZ easing bias firmly entrenched, Dairy prices remain weak.
      • Cross: Strong DXY, risk aversion.
      • Levels: Support 0.5800, Resistance 0.5900
    • USD/CHF (Swissy):
      • Direction: Bullish
      • Domestic (CH): SNB likely to maintain dovish stance, moderate Swiss yields.
      • Cross: Strong DXY, risk aversion driving safe-haven flows out of CHF.
      • Levels: Support 0.7800, Resistance 0.7900
    • EUR/GBP, EUR/JPY, GBP/JPY:
      • Direction (per cross): EUR/GBP: Bearish, EUR/JPY: Bearish, GBP/JPY: Neutral
      • Domestic: BoE remains relatively more hawkish than ECB/BoJ, yield divergence supports GBP.
      • Cross: DXY strength, risk aversion, cross-of-crosses flows impacting correlations.
      • Levels: EUR/GBP: R: 0.8550 S: 0.8500; EUR/JPY: R: 171.00 S: 170.50; GBP/JPY: R: 193.00 S: 192.50
    • XAU (Gold):
      • Direction: Bearish
      • Domestic (asset-specific): Rising real yields, lower breakevens weighing on gold.
      • Cross: Strong DXY, risk-off sentiment limited support.
      • Levels: Support $4,575, Resistance $4,600
    • XAG (Silver):
      • Direction: Bearish
      • Domestic (asset-specific): Weak industrial demand, Gold-Silver ratio trending higher.
      • Cross: Strong DXY, risk aversion exacerbating downside.
      • Levels: Support $4,450, Resistance $4,500
    • WTI / Brent:
      • Direction: Bullish
      • Domestic (asset-specific): Strait of Hormuz tensions, potential supply disruptions, inventories tight.
      • Cross: Weaker DXY providing some offset to risk-off flows.
      • Levels: WTI: S: $102, R: $105; Brent: S: $106, R: $109
    • Copper:
      • Direction: Bearish
      • Domestic (asset-specific): China growth concerns, LME stocks elevated, supply outlook improving.
      • Cross: Strong DXY, risk-off sentiment weighing on industrial metals.
      • Levels: Support $9,800, Resistance $10,000
    • SPX:
      • Direction: Bearish
      • Domestic (US): Rising real yields, concerns about future earnings growth.
      • Cross: Elevated VIX, global risk-off sentiment weighing on equities.
      • Levels: Futures: Support 5220, Resistance 5280
    • NDX:
      • Direction: Bearish
      • Domestic (US): Real yield sensitivity, mega-cap valuations stretched, AI hype fading.
      • Cross: Rates sensitivity, elevated VIX indicating heightened volatility.
      • Levels: Support 19500, Resistance 19700
    • US30 (Dow):
      • Direction: Bearish
      • Domestic (US): Concerns about future earnings growth, pressure on cyclical sectors.
      • Cross: Rising bond yields impacting valuations.
      • Levels: Support 39500, Resistance 40000
    • UK100 (FTSE):
      • Direction: Bearish
      • Domestic (UK): Stronger Sterling weighing, Gilt yields rising, commodity sector under pressure.
      • Cross: Global risk aversion, US tone dragging on sentiment.
      • Levels: Support 8350, Resistance 8400
    • DAX:
      • Direction: Bearish
      • Domestic (DE): Rising Bund yields, weak IFO/ZEW survey data, EU growth concerns.
      • Cross: US tech weakness, DXY strength, risk-off sentiment.
      • Levels: Support 24100, Resistance 24300
    • Nikkei:
      • Direction: Bearish
      • Domestic (JP): Stronger JPY weighing, BoJ under pressure to act, JGB yield curve flattening.
      • Cross: US tech weakness, risk aversion.
      • Levels: Support 38500, Resistance 39000
    • BTC:
      • Direction: Bearish
      • Domestic (asset-specific): Elevated funding rates, ETF flows slowing, on-chain metrics mixed.
      • Cross: Strong DXY, risk aversion, Nasdaq correlation weighing on sentiment.
      • Levels: Support $61,000, Resistance $63,000

    Positioning watch: AUD and Bitcoin are crowded longs (>95th percentile) vulnerable to disappointment if risk aversion intensifies or data disappoints, creating squeeze risk. JPY is a crowded short (<15th percentile) and could rally hard if the BoJ surprises or intervention occurs.

    The pain trade: A de-escalation in Middle East tensions, leading to a sharp drop in oil prices and a rally in risk assets, would hurt crowded short positions in bonds and crowded long positions in the dollar.

  • Sterling Under Pressure as Political Risks Rise – Friday, 15 May

    Where we are: GBP/USD is trading near 1.3385, testing lows not seen since early April. Overnight, Cable ranged between 1.3370 and 1.3430, remaining on the defensive. The pair is trading notably below the previous New York close, weighed down by concerns about UK political stability and a broad risk-off sentiment.

    What’s driving it: The pound is under pressure primarily due to growing domestic political uncertainty and its potential impact on fiscal policy. Concerns are mounting that Andy Burnham may challenge Keir Starmer, raising the spectre of looser borrowing limits and higher gilt yields; the UK 10-year yield has already hit its highest level since 2008. This downside is compounded by Trump’s comments pushing crude oil higher, fuelling inflation worries and necessitating further BoE rate hikes, of which the market already anticipates 70bp this year. The US 2Y yield is modestly lower at 3.98%, failing to offer Cable any respite.

    • UK 10-year gilt yields reaching levels not seen since 2008 indicates substantial market anxiety regarding UK fiscal outlook.
    • CFTC data reveals a crowded net-short positioning in GBP, with -63,908 contracts representing the 15th percentile, increasing the risk of a squeeze.
    • The Bank of England’s cautious stance, demonstrated by an 8-1 vote to hold rates steady at 4.50% at their last meeting, is failing to support the currency amid political turbulence.

    NY session focus: Traders will be closely monitoring any further developments regarding the UK political situation, along with broader risk sentiment driven by news flow out of the US. The 08:30 ET US data dump will provide short term direction. Key levels to watch are 1.3350 on the downside and 1.3430 as initial resistance. The short Sterling trade is currently working, while any long Cable positions are under considerable pressure. The pain trade would be a hawkish surprise from Huw Pill reversing the Sterling weakness.