GBP/USD inter-market: Keep an eye on US 10-yr treasury yields for GBP moves ahead of Brexit vote

The cable witnessed a 100-pips bullish opening at the start of the Brexit week, with the sudden upmove solely attributed to the weekend’s latest Brexit opinion polls’ outcome.

The latest polls on EU referendum showed votes shifting in favour of the ‘Remain’ campaign, with the BMG phone poll has 'Remain' leading by over 7 points, YouGov: 43% Leave, 44% Stay, 9% Undecided, Opinium: 44% Leave, 44% Stay, Survation: 42% Leave, 45% Stay, 13% Undecided.

Now looking at the instincts, it can be clearly observed that the prices are moving closely in sync with the US 10-year treasury yields over the past few trading sessions. The GBP/USD pair rose as high as 1.4672, up almost 2% intraday, while the 10-year treasury yields rocketed over 3% on the back of risk-on rally across the financial markets as the Brexit fears eased.

While the decline in Fed rate hike expectations, as reflected by CME the Group's Fed Fund futures contract, continues to weigh on the greenback against its major peers ever since the dovish Fed decision announced last week. Hence, the price-action behind the Fed fund futures does not justify the recent price valuations in GBP/USD.