GBP/USD daily
The pound has made steady progress today and is now at the best levels of the week, despite a mixed picture for risk assets overall. It’s up 36 pips to 1.3180, which is the best since Friday and would be the best closing level since last Wednesday.
Much of the move is being driven by a softer US dollar. Treasuries have been steadily bid, driving down yields. That extended after a softer ADP employment report but the retraced after a better ISM services index.
Still with US yields at the lowest levels of the year, the US dollar is struggling to stay strong after hitting multi-year highs in Q2.
Much of the move today is likely flow-driven as traders pare back exposure to US dollars ahead of Friday’s non-farm payrolls report. A soft jobs report would mean a 50 basis point rate cut later this month is the base case. Current pricing is at 41%.
Over in the UK, the market continues to price in a 76% chance of no cut at the September 19 BOE meeting. There is no notable UK data to come this week and no BOE speakers on the schedule.