Article / 05 August 2016 at 8:00 GMT

From the Floor: Sterling holds the line

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  • GBPUSD remains above 1.30, within monthly range after BoE cut
  • 'I remain negative on the FTSE 100 index': Saxo equities head Garnry
  • BoE decision sparks risk sentiment retreat, core bonds rally
  • 'We will need an NFP print over 200,000 to see major USD upside': Horchani

From the Floor
By Michael McKenna

Yesterday's Bank of England outing may have sparked a risk sentiment retreat that drove core bonds higher, introduced yet another instance of central bank quantitative easing to world markets, and left the door open for further cuts before year-end, but the pound – even after a 100-pip initial drop versus the greenback – remains essentially intact.

"The only mover overnight was the GBP," reports Saxo Bank trader Tareck Horchani from Singapore, "but GBPUSD held the 1.30 level, leaving its monthly range intact."

GBP volatilities and risk reversals headed lower after the BoE outing, says Saxo FX Options head Dan Larsen, but sterling bears did make their presence known as some interest was seen in three- and four-month options with strikes in the 1.25-28 level.

"Overall, it was a fairly subdued move," notes Larsen, although the bank's statement did show that it is ready to cut rates further should it be necessary, which likely accounts for the longer-term bearishness seen in certain sectors of the options market.

Stiff upper (and lower) lip, chaps:

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Source: Saxo Bank 

In stocks, Saxo Bank head of equity strategy Peter Garnry reports that he remains negative on the UK's FTSE 100 index, stating that "[BoE governor Mark] Carney's QE spree cannot change sentiment – markets have QE fatigue."

Another potential driver for stock traders looking for attractive short candidates is Goldman Sach's new report on copper, released this morning. According to Garnry, the US financial giant sees excess supplies increasing over the next six to 12 months, which when combined with already soft demand could send shares of materials sector firms like Glencore and BHP Billiton lower.

On the bullish side, Garnry says that he is positive on European insurers on psotive Q2 results and an expected divident yield of 5.9%.

Today's major risk event is the US nonfarm payrolls release for July, where consensus expects 180,000 new jobs following June's 287,000-strong blowout.

According to Horchani, only a significanty beat – say, above 200,000 – is likely to spark any real rally in the greenback while the consequences of a shortfall appear set to kick in a little closer to the estimate.

It's worth noting that Wednesday's ADP jobs release – an important if sometimes unreliable precursor to the NFP – saw 179,000 new payrolls added in July.

Finally, Saxo Bank head of fixed income strategy Simon Fasdal reports that core bonds were boosted by the BoE, aided further by a poor German factory orders print this morning, and look likely to benefit strongly from an "ugly" NFP release.

"Ten-year German bunds are trading in a short-term range between 166 and 168," says fasday, "and any break above 168 would need significant fuel as insitutional buyers remain wary of negative yields."

This ongoing hunt for yield, adds Fasdal, is driving demand for emerging market as well as peripheral European bonds, but a disastrous NFP could, he reiterates, help drive some demand back to the core.

The US jobs print will be released at 1230 GMT, so traders looking to benefit from long post-release candles would be wise to remain screenbound through mid-day and early afternoon.

It's a living
The glitz and glamour of high finance. Photo: iStock 

Michael McKenna is an editor at

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios 
05 August
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