Hedge funds remain positive for the pound

Currency speculators are already bullish moods for pounds for the first time in a year. The reason for this is that, despite the chaos around Brexit, Britain's economy is currently "avoiding" the negative effects of the situation is proving to be quite sustainable.

Hedge funds started the year with a very negative view of the pound, betting that the currency will further depreciate, which is already sold out very heavily after the referendum in 2016.

Last week, however, the ratio between speculative long and short positions began to bend to the bulls.

The mood swing came as data showed that the economy was 0.3 percent stronger for the first quarter of 2019 compared to the previous quarter, despite the bleak forecasts for the economy and Brexit sentiment. Retail sales in March also came out stronger than expected.

Moreover, the chances for BoE to raise interest rates by the summer have increased, with markets currently estimating a 20% chance of this happening in August, with only 10% last week.

Hedge funds have begun "cleaning" short positions in mid-March when the likelihood of Britain losing the initial exit date has risen. The European Union allowed a six-month delay in divorce, and it proved to be an exciting time for bulls to come up with new long positions.

Despite the strong economic data from the UK, few investors are still willing to engage with long positions in pounds because of the political uncertainty in the UK. A change in Conservative management is expected, and the chances of extraordinary elections are also rising, making analysts cautious.

Source: Financial Times

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