Cable stretches to the highs since September, rising 150 pips

Cable may have found a bottom.

The US dollar has sold off broadly today but the pound is taking particular advantage, up 150 pips to 1.2349.

It’s the best gain since a powerful stretch of gains in early June. That series of gains is a reminder that the pair can run when it has fuel. Given crowded US dollar longs, I’d argue that there is more in the tank here, especially on a close above the October high of 1.2337.

This pair has shown significant beta with equities and that’s important to keep in mind. US stocks have rallied for five straight days, helping to sustain this run. Until today, there was some greater skepticism in cable but after soft non-farm payrolls, it’s taken off.

Comments from the Bank of England this week suggest a stance much like that of the Fed and rate pricing for next year is similar as well. For now though, inflation is higher in the UK and that could ultimately mean the BOE is a laggard in the rate cutting cycle. So long as that isn’t accompanied by material underperformance in the UK economy, it could lead to sustained bids for the pound.