GBP/USD bulls moving in from the depths of New York's sell-off

• GBP/USD bulls correcting the avalanche from early NY trade's business. 
• US dollar firmer in risk-off tones in the financial markets. 
• BoE eyed for later this month, rate hike expected. 

At 1.2493, GBP/USD is down over 0.8% on the day and has fallen from a high of 1.2616 to a low of 1.2458. The US dollar has come back into vogue over the last few sessions amid a rise in US yields. The risk sentiment has been on tenterhooks and the pound typically trades as a high beat to the performance of global stocks, regarded as a risky currency due to the twin deficits. 

Stocks fell broadly midday Wednesday on worries over aggressive tightening risks. Asian exchanges traded choppily overnight, while European bourses edged lower on the continent. In the US, the US 10-year yield rose more than 9 basis points to 2.939% after the Institute for Supply Management's manufacturing index unexpectedly rose in May, climbing to 56.1 last month from 55.4 in April. The Dow Jones Industrial Average fell by 1.3% to 32,584 and the S&P 500 declined to a low of 4,073.85. This all occurred at the same time that the pound collapsed at the start of the New York session, losing some 140 pips in morning trade. 

In line with expectations, the Bank of England (BoE) hiked the Bank Rate by another 25bp to 1.00%. at the start of last month. As expected, attention was on forward guidance and not the rate hike itself which came in slightly dovish. Analysts at Danske Bank, consequently, changed their Bank of England call now expecting three additional 25bp rate hikes (June, August and November vs. 25bp in August and November previously) ''recognising that the Bank of England is probably not ready to slow the rate hike pace just yet.''

''We still see risks skewed towards more rate hikes, as risk is that inflation continues to surprise to the upside.''

On Wednesday, the Bank of England Deputy Governor Jon Cunliffe speaking on Wednesday who said that the central bank was seeing evidence of a slowdown in the housing market.

"We see evidence of a slowdown in the housing market. There are some straws in the wind that show the market is starting to turn," Cunliffe said in an interview with ITV News.

"The Bank expects the economy, that’s already slowing, and we expect it to slow further, to slow quite a lot over next year or so. And I think that will have an impact on the housing market."

GBP/USD technical analysis

Cable has started to rebound and a 50% mean reversion to restest old support at 1.2524, from May 25 trade, could be on the cards. This would be mitigating some of the price imbalance left behind following the recent bearish impulse: