GBP/USD — Another Milestone After 1.30 Resolution

If there were any doubts about the current market’s darling, look no further than the perky Sterling. The resolution above the 1.30 round number is yet another major milestone as overly short hedges to protect against a hard Brexit are coming to terms about the new reality sets in with the worst-case ‘hard Brexit’ scenario rapidly fading away as a tail risk in one’s portfolio. The liquidation of short hedge structures, improved UK data, and Brexit heading into a potential 2nd referendum, have all resurrected the Sterling in a very strong fashion. Just be aware that the current rise appears to be fairly overextended, especially if one takes as reference the recent USD strength, as shown in a green line in the chart, alongside some tapering in the UK vs US bond yield spread. Play the overextended rally with caution if trading off higher time frames. If engaging in short-term plays, the bullish momentum is really strong, so fighting this trend won’t be for the faint-hearted.