Compare the following two diagrams:
Sellers step in on the election day as expected with a strong barrier.
A sweep of the highs. Can sellers maintain the breakdown?
In the first, the test of 1.35 sent buyers wandering on grounds of an orderly Brexit, depriving sellers valuable resistance. However, it was dangerous for buyers to carry on because the eye of Brexit is on it. After a Johnson majority came the selloff and now the attempt by sellers to reinstate the strategic breakdown which was previously broken is powerfully gaining momentum from the monetary side.
Should we get the breakdown, the move will be fast as the insurance cut from BOE will not last beyond May. Bailey starts in May, it will take some time for the Johnson/Javid fiscal taps to work its way into the MPC forecasts meaning another late 2020 cut is then on the cards (not in play with this chart as will unlock 1.15).
To put simply, a dovish BOE and hard Brexit will keep rates in the lower bound and infinity will return in 2021. For the immediate term, market clearly caught on the wrong side; 1.290x is next followed by 1.277x. Very difficult to get constructive on UK markets with BOE turning dovish.
On the EURGBP side:
Good luck all those on the sell side in Cable and other Sterling crosses, a lot of meat left on the bone. As usual thanks so much for keeping your support coming with likes, comments and etc.