Betting on a fall in the British Pound - CFTC reports increase in speculative positions geared against sterling
Latest spot exchange rates
Before we look at how the speculative side of the foreign exchange market is currently betting, we take a look at the latest spot market rates of the three indicative currency pairs we follow:
- The pound euro exchange rate is flat on Friday night's closing rate at 1.1587.
- The pound US dollar exchange rate is 0.11 pct lower at 1.5366.
- The pound Australian dollar rate is 0.23 pct higher at 1.6646.
Please note that the above quotes are taken from the wholesale spot markets - your bank will add their own spread to the numbers when passing on their retail offer. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering more currency. Please learn more here.
Speculators betting against the British pound
More speculative foreign exchange traders are betting on a fall in the value of the British pound sterling on a week to week basis reports the CFTC.
Lloyds Bank Research comment:
"Net GBP short positions rose last week against the general trend of a decline in USD longs. The increase in short positions is somewhat surprising given the 1.4% rise in GBP/USD during that week.
"But the increase in short GBP positions suggest speculative short-term investors remain bearish on GBP in spite the recent run of decent domestic data and the July MPC minutes proving less dovish than the market had anticipated."
Data from the major US futures & options exchanges (CFTC) are released each Friday evening and report positions up to the close of business on the previous Tuesday. Traders are classified as either commercial or non-commercial.
The positioning of the non-commercial traders can be used as a proxy for the speculative side of the market.
British pound tipped to struggle by Lloyds
There are a number of key releases from the UK this week, with manufacturing PMI and the BoE MPC meeting on Thursday being the highlight of the week.
"GBP/USD has struggled to make much ground beyond the 1.54 level, and this maybe the case in the absence of further USD weakness, at least until the BoE Inflation report on the 7th. There remains plenty of uncertainty surrounding the shape forward guidance will take which will likely limit GBP upside for now," say Lloyds Bank.
Speculative traders not so hot on the US dollar
Elsewhere, one of the standout highlights from the latest CFTC report involves a reduction in the number of positions betting on US dollar gains.
"Aggregate net non-commercial USD long positions pared back marginally in the week of 23 July. Aggregate long positioning are now two thirds of the highs seen at the end of May, and are likely to have declined further over the past week. The USD came under pressure towards the end of last week
following the release of a dovish WSJ article," say Lloyds Bank.
In reality the FOMC were expected to keep the QE in place at Wednesday’s meeting, with most expecting QE ‘tapering’ to be announced at the September meeting.
However, Lloyds believe the market was likely concerned by talk of possible revisions to thresholds:
"There are risks the FOMC may announce new forward guidance with regards to rate hikes in the future, however it seems unlikely to be announced at this stage given the FOMC has taken some time and effort to adjust market expectations accordingly towards QE ‘tapering’.
"It is a heavy data week from the US this week; Q2 GDP, FOMC and payrolls will be key in determining sentiment towards the USD. USD long positioning remains quite modest by historic standards against the EUR and CAD, but remains very extended against the AUD and JPY, and to a lesser extent against GBP, suggesting these currencies would benefit most on USD position squaring."