GBP/USD inter-markets: GBP under further pressure

Cable is rebounding from more than 3-decade lows in the 1.2680 area posted on Wednesday, currently managing to keep the trade above the 1.2700 handle, although the broad-based sentiment favouring the greenback continues to cap occasional bullish attempts.

Yields in UK and US money markets are trading in a mixed performance so far today, most likely reflecting the cautious stance among traders in light of the upcoming release of the US Non-farm Payrolls (172K exp.).

Volatility measured by VIX keeps navigating the lower bound of the range, not helping GBP either, while Fed Funds futures prices have deflated from highs, despite the probability of a rate hike by the Federal Reserve at the December meeting remains above 50%.

In the near-to-medium term, GBP is expected to remain vulnerable in light of heightened concerns over the economic and political consequences of the Brexit vote, while the likeliness of looser monetary policy by the BoE and the firm possibility of the Fed hiking rates by year end adding to the bearish sentiment.

All in all, the near term resistance line off September’s top, today around 1.2960, continues to act as a relevant hurdle and emerges as the initial obstacle in case of a rebound. On the downside, the area of recent lows near 1.2680 should act as a decent support for the time being.