UK Sonia Interest Rate: Levels, Ranges, Targets

Sonia’s February range was 0.4728 – 0.4545, a 183 bps range and slightly below the 203 bps range from 0.4720 – 0.4517 in January. Current price at 0.4660 is below last month reported 0.4668 and 0.4660 was February’s opening monthly price. The opening price for March was 0.4672.
Sonia’s current range is found between lows at 0.4328, 0.4322 and highs between 0.4665 and 0.4860. Sonia is on the verge of a break at 0.4665 to enter a new interval between 0.4665 0 0.4860. The larger range is found between the 3 – 8 year monthly averages from 0.4393 – 0.8869 followed by the 9 year average at 1.4112. To offer context to 0.4860, GBP overnight Libor for the 4 trading days in March traded at 0.4812 and an OIS spread of 152 basis points from current 0.4660. February 29th saw the largest OIS change at 203 basis points. Since February 18, the OIS spread traded between 84 basis point lows to 204 highs. The Current 10 year – 3 month yield spreads trade at 1.026 and 10 – 2 year spreads trade at 1.078.
Sonia at current 0.4660 trades above all monthly averages from 1-7 years. The same averages last month were severely overbought. This month, averages from 1- 4 years remain overbought while the 5, 6 and 7 year averages are oversold. Many supports exists below beginning with the 6 year average at 0.4641, the 7 year at 0.4607 and 1 and 5 year averages at 0.4596 and 0.4576. Below the 5 year average at 0.4579 targets next 2 and 4 year averages at 0.4442 and 0.4422. Any rises in current price means further overbought for averages between short term averages between 1 – 4 years.
What drives Sonia prices are averages 1, 3 and 4 year at 0.4596, 0.4393 and 0.4422. Current averages are overbought, any prices rises leaves those averages susceptible to sell offs. Current targets are located at 0.4634, 0.4624, 0.4608 and 0.4509. Peaks are seen in the 4 and 5 year averages from 0.4422 and 0.4579. The 5 year is a misaligned average and explains current peaks. Sonia for the days ahead is a sell rally interest rate to target next lows first at 0.4641.
Sonia to reiterate from last month is located not only at historic lows but lifetime lows since its 1997 inception. Yet all UK interest rates are located at lifetime lows since the 1971 currency free float.

Brian Twomey, Inside the Currency Market,


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