GBP/USD: how sustainable is the bounce?

The Sterling is outperforming its G10 peers during the second half of the week, now gaining around 2 cents since more than three decades lows in levels just below the 1.2800 mark seen on Wednesday.

There is not much in terms of catalysts of the up move, although the renewed selling bias around the greenback and today’s recovery in UK money markets seem to suffice for the time being. Furthermore, volatility performance gauged by VIX is testing daily lows, adding to some risk-on sentiment and thus supporting GBP.

Earlier in the session, UK’s Industrial/Manufacturing Production results have surprised markets to the upside, while the NIESR GDP Estimate has ticked higher to 0.6% from 0.5%, all collaborating with the upside.

Despite ‘Brexit’ concerns appear somewhat alleviated today, they stay as the main drivers not only behind GBP’s price action but also for the global sentiment in the months to come.

That being said, developments from across the Channel and the upcoming key releases in the US, namely tomorrow’s Payrolls, will surely give investors an idea of whether this is a decent recovery or the well-known ‘dead-cat bounce’.