GBP/USD surges to 1.27 handle on BoE’s Haldane

The GBP/USD pair erased early declines to fresh two-month lows, below the 1.2600 handle, and has now jumped to fresh session tops near mid-1.2600s.

The pair witnessed a follow through selling pressure through early European session on Wednesday and dropped to its lowest level since April 18, the day when UK PM Theresa May announced snap election. Against the backdrop of UK political uncertainty, the BoE Governor Mark Carney on Tuesday downplayed expectations of any immediate rate-hike action and was seen weighing on the major.

The pair, however, quickly reversed early losses and the recovery move gained momentum following the UK Queen's Mansion House speech. Queen Elizabeth's speech marked the formal start of the new parliament and during her opening comments the Queen was noted saying that government's priority is securing best Brexit deal.

The speech had little in terms of anything controversial and triggered a short-covering bounce. Adding to this, hawkish comments by BoE Chief Economist Andy Haldane resurfaced rate-hike expectations relatively soon and further collaborated to the pair's sharp recovery move from lower levels. 

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Meanwhile, possibilities of some stops being triggered on a decisive move beyond 1.2635 level seems to have been a key factor for the pair's sharp spike over the past hour or so.

Technical levels to watch

A strong follow through buying interest beyond the 1.2700 handle has the potential to lift the pair towards 1.2750-55 horizontal resistance ahead of the 1.2800 round figure mark. On the downside, retracement back below 1.2635 level now seems to find support near the 1.2600 handle, which if broken would turn the pair vulnerable to extend the near-term slide towards its next support near 1.2545-40 zone.