USD, GBP flows: USD firm on ISM but move looking extended

A strong services ISM in everything but the employment component gave the USD a further initial boost, though the gains have been largely reversed after the initial move. US yields are once again higher, and the most notable move in spreads on the day is with GBP, where yields are lower after the press comments from BoE governor Bailey earlier, indicating a more dovish policy stance as likely going forward. Even so, the move in GBP/USD is large compared to the recent correlation with yield spreads, and with spreads also still supportive of GBP/USD from a bigger picture perspective, we suspect there will be buyers above 1.30. Given that the move in US/UK yields is larger than those elsewhere, the implication is that general USD strength may also be starting to get a little overdone, and the USD may be a little toppy here ahead of tomorrow's employment data.