Some analysts pull back their pessimistic sterling bets

The pound’s resilience following buoyant post-Brexit economic data is encouraging some sterling pessimists to rethink their short-term strategies.

Deutsche Bank has exited a bet for sterling to fall on a trade-weighted basis, while retaining its longer-term negative view on the UK currency.

UniCredit said it had closed a short pound-dollar position, or a wager sterling would weaken, to reduce “tactical” risk.

The pound rose for a fifth day against sterling, its longest winning streak since March.

Reports such as an index of August services, which jumped the most on record when it was published earlier this week, give a more positive view of the UK economy in the wake of the June 23 vote to leave the EU than many had predicted.

To analysts, this reduces the need for the Bank of England to further expand its rebooted bond-buying programme or to cut interest rates when it announces any next move next week.

“Recent data suggest the near-term confidence impact of Brexit may have been overstated, and with risks the Bank of England now sound a more sanguine note, we take profit on our May” recommendation to bet against the pound on a trade-weighted basis, said London-based Deutsche Bank strategist Oliver Harvey in a note.

“This doesn’t change our medium-term bearish outlook, however.”

Sterling gained 0.1% to 83.70 pence against the euro, climbing for a sixth straight day.

Deutsche Bank’s index of sterling versus the currencies of Britain’s biggest trading partners climbed to the highest since July 21 on a closing-price basis.

Both Deutsche Bank and UniCredit cited risks surrounding Britain’s negotiations for exiting the world’s largest single market when explaining their pessimistic longer-term outlooks.

While the pound’s 10% against the dollar since the EU referendum is still the worst performance among major currencies, hedge funds, and other large speculators last week cut their bearish sterling bets for the first time since early July, reducing them from a record, according to the Commodity Futures Trading Commission in Washington.