Where we are: Cable is currently trading around 1.3535, pressured by rising UK borrowing costs. The pair traded in a tight overnight range, failing to sustain a recovery from yesterday’s late weakness. This level sits below the prior NY close, reflecting ongoing selling pressure this morning. Immediate resistance is seen near 1.3580, with support around 1.3500.
What’s driving it: Domestic political uncertainty is weighing heavily on the Pound. News that UK borrowing costs have surged to levels not seen since 1998, coupled with continued pressure on Prime Minister Starmer, is sapping investor confidence. This is compounded by the Bank of England’s cautious stance; the central bank held rates steady at 4.50% at its last meeting, with an 8-1 vote split reflecting a reluctance to commit to a dovish path. While US macro plays a role, it’s clearly second fiddle to the immediate UK situation here.
- UK 10-year gilt yields are trading at their highest level since 1998, reflecting rising borrowing costs and investor nervousness.
- Speculative positioning in GBP remains crowded short at the 15th percentile, increasing the risk of a squeeze if the political situation stabilizes.
- BIS central bank speeches are focused on US monetary policy and digital assets, offering little immediate support for Sterling.
NY session focus: All eyes on the 08:30 ET US CPI release. A stronger-than-expected print could further bolster the Dollar and weigh on Cable, testing the 1.3500 level. Conversely, a downside surprise might offer a temporary reprieve, potentially pushing Cable towards 1.3580. Keep an eye on the 11:59 ET Fed Chair Nomination Vote — a surprise outcome would ripple through markets. The trade that’s working is selling into rallies, while the risk lies in a sudden shift in UK political sentiment. The pain trade here? A Starmer reaffirmation triggering a short squeeze.