The mood in markets is souring with the S&P 500 down 7 points, or 0.1%. It’s looking increasingly like the FX and stock markets were behind the bond market, though I’m still extremely wary of month-end flows.
In any case, some caution has spilled over into cable as it unwinds some of the earlier gains. The pair is now trading at 1.2385 from a high of 1.2446.
There are mounting UK economic worries along with fears that the Bank of England will be particularly ruthless about inflation. The May inflation report was hot and last week’s retail sales report was up 0.5% m/m compared to 0.3% expected.
Outside of today’s rally, cable has been trending down since the second week of the month. A good portion of that is broad US dollar strength — and there are plenty of things to like about the UK economy — but today’s price action looks like month-end flows, not the start of a rebound.