British Pound Supported by Speculation on Upcoming BoE Policy Decision

GBP maintained a firmer tone and Cable moved in to the 1.6980 area following a bout of European interbank demand from the 1.6930. The Asian peak of 1.7004 is likely to be threatened by short term accounts attempting to trigger stops through 1.7005-10, which remained intact overnight. Option barriers at 1.7000 were successfully extinguished, but the pair immediately turned lower as option longs bailed out of spot positions. The backdrop of a weaker dollar trend should drive the market. However, market positioning and this week’s key policy decision from the BoE could see a pause in the rally. There are growing expectations that the BoE will end its QE program and this is being reflected in the recent GBP moves, which forced EUR-GBP down to 0.8461 on Monday. The cross is being underpinned from 0.8480-85 bids out of Frankfurt, while the supportive EUR-USD tone is also aiding sentiment. However, downside risk remains and the 0.8400 low from June 22 is still a viable target.