Cable has risen to its highs for the day and buyers are now contesting a break above the 100-hour MA (red line) @ 1.2702. This comes as the labour market report earlier beats expectations and is defying the economic slowdown from data we saw yesterday, which NIESR suggested that we could see a -0.2% Q2 GDP growth in the UK.
Essentially, this comes down to the point of can wages and inflation spur enough confidence for the BOE to tell markets that they will hike rates in light of political and economic uncertainty? My view is still a firm no in that regard.
The rates market isn't getting too carried away either with just small shifts in short sterling futures but nothing to suggest that we're starting to see a significant repricing on the market view of BOE rate hikes for now.
The pound may see some short-term gains on position squaring and with buyers seizing near-term control in cable, we could see a slight extension higher towards 1.2750 again. But I don't expect those gains to last the course given that Brexit uncertainty is still ever present and remains the biggest risk factor for the currency at the moment.
As such, I will still advocate for fading the rallies in the quid until there is good reason to believe that Brexit will turn out for the better over the next few weeks.