GBP/USD inter-markets: ‘Brexit’ setting the tone

The Sterling has managed to leave behind post-Brexit lows in the 1.3120 area – levels last seen over 30 years ago – and push GBP/USD to recent tops above the 1.3500 handle, albeit fading part of those gains afterwards.

Momentum around Cable remains exclusively influenced by the back-and-forth from the ‘Brexit’ aftermath and the political and economic implications for both the UK and EU that will surely arise in coming weeks. Today’s earlier decision by ‘Leave’ campaigner Boris Johnson not to run for primer minister has impacted on the risk-associated space, triggering the ongoing knee-jerk and somewhat capping GBP’s upside.

A firmer tone from UK’s money markets in the short-end of the curve is contrasting with the subdued demand for the British pound, while volatility tracked by VIX remains in minimum levels.

All in all, a pick up in the greenback – tracked by the US Dollar Index – seems to be the main reason behind today’s correction from recent highs, although caution also seems to linger ahead of the key speech by Governor M.Carney.