GBP/USD Intermarket: UK mining stocks risk sell-off if GBP rallies after BOE rate decision

FTSE 350 mining index and the major mining stocks in FTSE 100 index had been more or less mimicking the move in oil prices until Brexit vote happened and Pound suffered a sell-off.

Pound’s sharp drop ensured the UK miners, who earn in US dollars, remained resilient to the recent slide in oil prices.

FTSE 350 mining index rallied from Brexit day low of 9103.60 to a high of 12,161.46 (July 13 high). During the same time period, Brent oil deflated from $51/barrel to $46.00. Over the last two weeks, FTSE 350 dipped to 11,000 and recovered to near 12,000 levels, while oil continued its slide…and traded below $40/barrel this week.

This clearly indicates that miners have stayed resilient to oil price slide due to GBP weakness. This makes FTSE 350 and mining heavyweights vulnerable to a jump in British Pound after BOE meet. Pound is seen rising if the BOE delivers rate cut/stays pat. Fresh sell-off in Pound is seen happening only if the BOE delivers a rate cut and talks about restarting the QE program.