British pound sterling finds a favourite amongst currency market speculators once more

The latest IMM Commitment of Traders report has shown the currency market speculators are falling back in love with the pound.

"The TFF report showed hedge funds significantly increased EUR longs while asset managers pared shorts. Speculative shorts were trimmed for JPY, GBP, CAD and AUD. The TFF report shows that hedge funds substantially added to long GBP positions. Hedge fund GBP positioning has completely flipped in the space of eight weeks from -56% of open interest to +44 %" says Gaël Gunubu at Deutsche Bank.

Aggregate USD long positions declined in the run up to the FOMC meeting last week, falling to the lowest level since February.

There was USD selling across the board although it was more pronounced against GBP and AUD, likely due to positioning being extended.

However, JPY short positions were pared backm marginally by comparison and positioning remains at extreme levels.

The moves seen post-FOMC suggests USD long positions are likely to have declined further and may well be near flat now.

USD sentiment will be largely dependent on the data. There are few key releases this week, but there are a number of FOMC members speaking which will be closely watched as the market looks for more information on the thinking behind the Fed’s decision not to announce tapering last week.

Net GBP short positions declined sharply in the week to 17 September.

Short positions fell to the lowest level since February. GBP/USD rose further post-FOMC reaching a high of 1.6163 and GBP positioning may well have turned marginally net long now.

"Given the recent better run of domestic data GBP/USD will likely remain well supported. However, with short positions likely to be squared, there is likely to be less scope for further GBP upside in the absence of a weaker USD or some strong UK data," say Lloyds Bank Research.

Net AUD short positions were significantly reduced last week, declining to the lowest level since May.

The move through the 0.95 level in AUD/USD post-FOMC will likely have triggered further squaring of short AUD positions. With positioning likely to be closer to flat now, and with the RBA showing a dislike for a strong AUD and still maintaining an easing bias, we think AUD is perhaps most vulnerable should we see a turnaround in USD sentiment.