The pound saw a big rebound in trading yesterday, rising above 1.1000 against the dollar. The high briefly hit 1.1200 today, but amid volatile trading the Cable is back down to just below 1.1100. Meanwhile, there was mixed action in the broader markets, with stocks hammered while some commodities held higher. As for bond yields, they rose slightly after falling on Wednesday following the BOE’s QE-type intervention on gilts.
It’s all about flow and technique (to some degree), but the former is what’s dominating sentiment right now. With the end of the month and the end of the quarter also in focus, this will only add to the mess and make it difficult to read the volatile movements of the last few sessions. Trading today will also be no different in my opinion.
I think we will only have a better idea of market appetite and real money positioning once we get past this time frame and head into October trading next week. As such, don’t be surprised if we get contradictory and sudden volatile moves in the markets later in the day ahead of the weekend.
If you don’t want to face volatility in the day ahead, the best thing to do is sit on the sidelines and read how the moves are moving against key technical levels. This will give you a better idea of how to weigh this in the current fundamental environment (Fed hawkish, equities under pressure, falling bonds vs BOE relief, high inflation and rising recession risks) before you make your next step.