UK: Less noise helping the ‘trashy’ pound clean up its act; wage data today - ING

After having eyed up the 1.40 level for a few days now, GBP/USD meaningfully moved through this key psychological barrier yesterday – and traded to a fresh post-Brexit referendum high, points out Viraj Patel, Research Analyst at ING.

Key Quotes

“While it may seem acute to rationalise sterling’s move higher as a shift in market sentiment towards a ‘soft’ Brexit, we think that this would be a classic case of ‘ex post fitting’. In fact, if one wanted any other reason than broad-based dollar weakness, it’s that it all seems fairly calm for now on the domestic UK political front – at least relative to what we’ve become accustomed to in a post-Brexit world.”

“Without getting too ahead of ourselves, GBP/USD trading at 1.50 is still a realistic possibility in late 2018 – but the onus is now shifting towards finding GBP-specific catalysts to take us there (if we were to breakdown our call for 1.50 in 4Q18 – it’s a function of a 3% appreciation in the pound and a further 4% depreciation in the dollar).”

“In terms of GBP-specific catalysts, one potential source that we’ve cited is a hawkish re-pricing of BoE policy expectations – with UK wage inflation ultimately holding the key here. Any positive wage growth surprise in today’s UK jobs report (0930 GMT) will see GBP/USD stabilise above 1.40, with EUR/GBP testing the 0.8760/70 support area.”