British Pound May Seem Firm but Yields have Tumbled Since Minutes, GDP

On an open-to-close basis, GBPUSD has advanced for 10 consecutive days. We haven’t seen a move with this level of consistency in over a decade. So, the sterling must be incredibly strong…right? Not really. Put up against its fundamental counterpart, the pound hit a new low for the year against the euro. Other safe haven currencies (the Swiss franc and Japanese yen) have covered meaningful ground against the pound – especially over the final days of the past week. And, the commodity currencies are just off multi-month or record highs when measured against the pound. It is important to look beyond the cable (sensitive to risk appetite trends) when establishing a view on the sterling itself. In fact, since the report of a contraction in 4Q GDP and the BoE minutes laid more track towards additional bond purchases, the 10-year gilt yield has slid back towards recent record lows. As for GBPUSD, it is only a matter of time before the risk run stalls.