Speculative Bets against British Pound and Euro Surge

Data on the positioning of traders on the global foreign exchange market confirms a jump in bets against both Pound Sterling and the Euro.

According to the most recent set of IMM data, 'shorts' against the Pound increased by 12K to -59K contracts. The move into positions against the Pound come at a time of intensified selling of the currency and suggests the market is expecting further losses.

EUR 'longs' decreased by 12K to 11K contracts, the smallest level since May 2017 when France went to the polls. "Details show a continued liquidation of gross longs and an aggressive build in gross shorts," says Shaun Osborne, a strategist with Scotiabank in Toronto.

Foreign exchange positioning data

IMM data is part of the Commitments of Traders (COT) reports published by the U.S. Commodity Futures Trading Commission (CFTC) and it offers the largest possible snapshot of how traders are positioned on global currencies.

"This week’s positioning adjustments were dominated by the G4 currencies as speculators more than halved the modestly long EUR position while simultaneously adding to their GBP short," says Osborne.

The data therefore suggests that foreign exchange traders are anticipating yet further declines in Sterling and the Euro.

"The aggregate USD long has climbed to a fresh high, nearing $23bn at levels last seen in January 2017. The aggregate USD long is largely composed of sizeable short positions in havens JPY and CHF, as well as GBP," says Osborne.

The call comes at a torrid time for the Pound and Euro which both suffered notable losses against the Dollar in the week past: The Euro-Dollar exchange rate fell below the crucial 1.15 level for the first time in months as the Turkish Lira slumped and concerns grew that troubles in Turkey would have a negative impact on Eurozone financial assets.

The Pound-to-Dollar exchange rate's downtrend extended in the face of broad-based USD strength and a continued rise in 'no deal' Brexit concerns.

The Pound-to-Euro exchange rate meanwhile fell to a multi-month low of 1.1073 before recovering to record a high at 1.1245.

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