Article / 14 July 2016 at 11:25 GMT

Mid-session Europe: GBPUSD spikes 200 pips as BoE holds ground

Saxo Markets


Foreign exchange
The Bank of England held off cutting interest rates Thursday morning as had been widely expected and GBPUSD spiked some 200 pips in the immediate aftermath for a peak above 1.3450 before subsiding. It comes on yet another extraordinary morning of politics in the UK which has seen Boris Johnson take the plum foreign secretary role.

GBPUSD was at 1.3370 at 1124 GMT.

Elsewhere, European stocks are advancing with the FTSE 100 hitting an 11-month high and Dax once again across the 10,000 threshhold. Germany, meanwhile, has issued a 10-year bond at a negative yield as the new "normal" asserts itself.


  • US Initial Jobless Claims (265K exp.) (1230 GMT)

  • US June PPI Final Demand (1230)


  • Federal Reserve's Dennis Lockhart to speak  (1515)
  • Federal Reserve’s Lockhart to speak  (1715)

Forex developments

JPY continued to deprecate vs majors today, with USDJPY cleared well above 105.00 on speculation of Japan’s fiscal stimulus package to be clarified later this month. The BoE interest-rate decision did not deliver the expected easing for the first time since 2009 that had been priced in priced in. EURUSD traded in tight range around 1.100 figure throughout the session. 

GBP: GBPUSD spiked some 200 pips in the immediate aftermath of the BoE shock deicision not to cut interest rates to above 1.3450.

FX Options volatilities
One-week expiry rolls to the next European Central Bank meeting and is therefore being marked higher today. EURUSD at-the-money volumes is trading sidelined so far this morning, but risk reversals continue to trade less in favour of EUR puts. 

In frontend overnight one-week risk reversals are now in favour of EUR calls and the latest we have seen is overnight 1.1200 paid at 15 vols in good amount, while ATM was trading at 12.5 vols. USDJPY vol is trading a bit higher together with higher spot. 

Fixed income
Bunds are paring losses to trade back above 167. Germany has become the first Eurozone member to issue 10-year bonds at negative yield. The Bank of England fluffed its lines today so what will the ECB do? No stress in US financials ahead of JPM earnings.



Stocks across Europe pushed higher Thursday, looking for a fifth gain in six sessions, although we are yet to see how that will pan out after the BoE non-decision.

Germany’s Dax 30 climbed 1.5% to 10,0081.17, on track for its first close above 10,000 since June 23. France’s CAC 40 rose 1.3% to 4,389.60. Financials and technology shares were the best performing groups, FactSet data showed.

Among individual gainers, UniCredit SpA shares tacked on 5.6% after Italy’s largest lender said it’s considering a capital increase to meet ECB requirements, as recent asset sales may not be enough to satisfy the central bank.

Markets had largely priced in a BoE cut of 25 basis points in the benchmark interest rate, to a record low 0.25%. The bank’s rate hasn’t been changed since March 2009 when it was cut to 0.5%.


Our Morning Call can be accessed here

Join our Weekly OptionsLab on Wednesday  to find out more on covered call strategy.

Read more

Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

 I've only gone and landed the foreign-secretary role! Photo: iStock

— Edited by Martin O'Rourke

The Global Sales Trading desk is a multi-asset team providing customised trading solutions


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail