Futures speculators and options traders appear to have diverging views on where sterling is headed. They can’t both be right.
Futures bets against the pound have been trimmed over recent weeks, even as polls suggest the U.K.’s June 8 election is tightening, data from the U.S. Commodity Futures Trading Commission show. The opposite has been happening with sterling put options, which have been increasing in notional value. Use Bloomberg functions to identify such trends.
Our expectations for the pound is to head lower from current levels, due to the fact that even if the most favorable scenario did play out, the price has already reflected the positive news. There is a doubt that the May's party can take the majority and if this is correct, this will be negative and the fall of the pound can be even extended. The fundamental factors remain bearish as the economy is pron to weakness and the uncertainties around the process for Brexit and the future negotiations with the Eurozone.
Source: Bloomberg Pro Terminal
Trader Senan Fuchedzhiev
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