Speculators cut bearish bets that sterling will fall

Sterling rose for the first time in four days yesterday as hedge funds and other large speculators cut their bets that the currency will fall for a second week before the Bank of England’s latest policy decision.

It is the first back-to-back reduction in ‘net short positions’ in sterling since Britain voted to leave the EU in June. 

The UK currency gained versus all except one of its 16 major peers before the release of a UK prices report today that economists forecast will show annual consumer-price inflation accelerated in August at the fastest pace since November 2014.

JPMorgan Chase revised up its year-end forecasts for the pound against the dollar and the euro, citing a resilient growth outlook.

Monetary Policy Committee members led by governor Mark Carney will announce their decision on Thursday.

“We do sense a period of sterling stability, at least for now,” said Neil Jones, head of hedge fund sales at Mizuho Bank in London.

“UK economic performance after the Brexit vote is proving better than expected. On the political front, sentiment is shifting from immediate hard Brexit to a more prolonged but softer one.”

The pound rose 0.3% to $1.3308 after sliding 1.3% the previous three days. 

It rose 0.4% to 84.34p against the euro, having depreciated 0.9% last week after the ECB refrained from extending its monetary stimulus.

Sterling has outperformed all of its 16 major counterparts in the past month as reports from services to construction showed the UK economy was holding up better than some economists predicted, marking a turnaround from the Brexit vote.

It touched a 31-year low of $1.2798 on July 6 and is still down 11% against the dollar since the June 23 poll.


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