Pound Rebounds As Risk Appetite Dictates Price Action
Pound bulls were out for the first time in a week as Greek bailout rumors spark broad based risk appetite. The GBP/USD is working on its first positive day since February 2nd which was just ahead of the BoE’s rate decision. Risk trends have started to dominate price direction as policy makers remain on hold as existing downside risks to growth has made it formidable to begin tightening despite inflation well above their 2.0% target at 2.9%. Equity movements are explaining 48% of the pair’s volatility which is near its highest levels set back in late June, 2008. Now that it has become clear that most central banks will most likely remain on hold until the latter part of 2010, markets have regressed back to the prior trend of a pure risk on risk off trade.