GBP/USD: Choppy Moves As Both Currencies Unloved

An extension of the price action wrangling with clear characterizations of a directionless market, as the yo-yo type swings from Wednesday reflect. Both currencies were badly punished by the two hottest narratives market were fixated with (FOMC and ongoing Brexit developments). By the end of business in NY, the Sterling managed to recover most of its losses on the back of the dovish FOMC, and judging by the intermarket flows, we’ve now entered a period of buy-side bias based on the synchronicity of micro/macro slopes in the DXY (inverted) and the UK-US bond yield spread. However, be warned that we are at the peak of the Brexit pandemonium-led vol, which means that trading around potential times when headlines may arise (Brexit summit underway from today) makes any short-term trading engagement inherently riskier given the erratic headline-by--headline vol, which is going to make the GBP behave not necessarily in line with the cues obtained by the DXY, more so by the fluctuations in the bond yield spread as a barometer of optimism in the Brexit process. If you look to exploit movements in the currency market, there are way better currency alternatives to exploit the USD weakness than dipping one’s toes in the wildly unstable GBP and its price action.