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25 Apr 2016
GBP/USD yield spreads supporting the bid - Scotiabank
GBP is strengthening against most of its G10 peers with a clear break of the 100 day MA (1.4423) and a rally to a fresh one month high.
Key Quotes:
"Sentiment remains a key driver for GBP as market participants consider the shift in risk surrounding the UK referendum. Bloomberg’s EU referendum poll tracker shows a clear decline in the share of ‘don’t know’ respondents and a corresponding rise in the ‘remain’ category.
"Measures of implied GBP volatility have moderated considerably and risk reversals suggest an impressive moderation in the cost of protection against GBP weakness.
This week’s risk events are dominated by Wednesday’s domestic GDP for Q1 (advance) followed by the FOMC.
In terms of fundamentals, yield spreads are providing support to GBP with a steady 15bpt narrowing in the 2Y spread over the past two months."
Key Quotes:
"Sentiment remains a key driver for GBP as market participants consider the shift in risk surrounding the UK referendum. Bloomberg’s EU referendum poll tracker shows a clear decline in the share of ‘don’t know’ respondents and a corresponding rise in the ‘remain’ category.
"Measures of implied GBP volatility have moderated considerably and risk reversals suggest an impressive moderation in the cost of protection against GBP weakness.
This week’s risk events are dominated by Wednesday’s domestic GDP for Q1 (advance) followed by the FOMC.
In terms of fundamentals, yield spreads are providing support to GBP with a steady 15bpt narrowing in the 2Y spread over the past two months."