Trying to shed light on the GBP moves overnight will be extremely difficult in the current climate, with the wide variety of trading platforms leaving all markets open to moves such as this in a community now heavily populated with machine based trading. Some have alluded to comments made by French president Hollande that the UK is facing a ‘hard Brexit’ as a potential catalyst for the move, but going through at a time when liquidity is at its weakest will have conspiracy theorists looking to market manipulation, and a fat finger trade also in the reasoning. All of this is academic now as the London market picks up the pieces, but in the 4-5 hours, we have seen Cable balancing out in the 1.2350-1.2480 range, with EUR/GBP hovering above and hold off .8900. The cross rate highs are largely accepted to have been a little shy of .9300 by consensus, but the spot rate has the more official platforms quoting the low 1.2000’s and 1.1840-45 as the lows trade. Looking ahead, we doubt the UK industrial and manufacturing production numbers will have too much impact on GBP this morning, and perhaps again after US payrolls, but we can expect to see any major moves in Cable – which will likely be the move active rate today - contained towards 1.2000 on the downside, while 1.2600-20 may cap initially higher up.
What goes up, must go down