GBP: Implied Yields and Trading Ranges

GBP: An expensive sell

With one-month implied yields at 5.20%, sterling is an expensive sell. For that reason, we think EUR/GBP may continue to trade in the 0.86-0.87 range for the time being rather than continue to march higher. GBP/USD is a different story where the ongoing strength of the dollar and the softening risk environment warn that little support can be expected before the 1.2000/2075 area.

UK-specific inputs are light at the moment. But because last week's Bank of England vote for unchanged policy was so close, the market is reluctant to completely price out the risk of one last rate hike.