GBP: Key Support Under Pressure, But Vols Promote Range Trade
* GBPUSD's drift through the 1.33 handle today is the first since late July and brings spot within range of key support into 1.3274, the pullback low before the August rally. While the rallying USD is the primary driver of the move here (USD Index trades back above 100.00), short-term underlying momentum in EURGBP is also beginning to look positive, as evidenced in the upturn for the 50-dma - narrowing the gap with both the 100- and 200-dma measures. * GBP vols look to have bottomed out with the USD rally (1m implied has risen back to 5.4 points over the past week and is challenging the recent downtrend), but it looks unlikely we'll return to the levels of outright vol enjoyed earlier this year. Instead, lower highs and lower lows for vol promote range trade - making the late July lows a key support as well as 1.3140 - the YTD low posted in June. It's here that a possible range break-out will be in focus - a development that could underpin vols, particularly if the mirrored pricing for the BoE and ECB policy cycles is disrupted. * As such, UK pay settlements remain a key focus, and markets will be watching for any flattening out of pay expectations through year-end, particularly in
3274, the pullback low before the August rally. 00), short-term underlying momentum in EURGBP is also beginning to look positive, as evidenced in the upturn for the 50-dma - narrowing the gap with both the 100- and 200-dma measures. 4 points over the past week and is challenging the recent downtrend), but it looks unlikely we'll return to the levels of outright vol enjoyed earlier this year. 3140 - the YTD low posted in June.
It's here that a possible range break-out will be in focus - a development that could underpin vols, particularly if the mirrored pricing for the BoE and ECB policy cycles is disrupted. * As such, UK pay settlements remain a key focus, and markets will be watching for any flattening out of pay expectations through year-end, particularly in light of the Brightmine wage data overnight, which showed few signs of elevated pay demands driving future inflation, as the rise in their pay awards measure in August was unchanged. The most important measure here is the BoE's DMP CPI expectations release on October 2nd.
* Bolstering the importance of the late June low is it's coincidence with several phases of dip-buying in the pair since the start of 2025. 2% retracement - adding additional weight to the zone of support.