The British pound keeps soaring despite overall deterioration in market sentiment. What’s behind the surge of the currency ❓
The British pound is a clear winner among majors this year. GBPUSD was trading above 1.42 today in the Asian trade vs 1.3670 at the beginning of the year and as low as 1.2685 at the end of September. GBP is winning mostly on reopening hopes with bond yields in UK rising nearly as sharply as in the US. In fact, news that UK reopening could even accelerate if data is positive, has fueled more GBP strength today.
Yes, there are signs of the overheated market – speculative positioning approaching multiyear highs and price rising towards the upper limit in a longer run channel. However, this trend is very strong and the fact that GBP did not react to Wall Street correction can be seen as a strong positive. The next barrier for bulls to watch is obviously 1.4375 high from 2018.