Traders increase sterling bull position since Brexit

Speculators have accumulated their largest long position in sterling in dollar terms since Brexit, but uncontrollable inflation and lackluster growth indicate that the pound's party will not endure, according to hedge funds and their clients.
WAN CHAI, Hong Kong - July 28, 2023 - PRLog -- The Commodity Futures Trading Commission (CFTC) reported on Friday that net long speculative holdings hit $4.7 billion on July 11, the highest value in dollars since mid-2014, two years before the Brexit vote.

It is the largest net long position in futures contracts since 2007.

Inflation in the United Kingdom has defied predictions in each of the last four months, sending the pound up 8% versus the dollar this year, while inflation in the United States has decreased.

For the first time, pay growth in the United Kingdom surpassed 7% in May.

The Bank of England surprised the market with a half-point boost in June for the first time since the 1990s. Traders who believed the Bank of England would be largely finished by May are now pricing in rates climbing beyond 6% from 5% now.

This has maintained Transtrend, a $5.8 billion Rotterdam-based investment company, long sterling. It maintains a positive position in its Diversified Trend Program (DTP) fund, which uses systematic computer trading.

As traders strengthen their expectations for the Bank of England to hike interest rates, they are also increasingly factoring in the possibility that US rates are likely to peak.

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