GBP: Another upside correction in positioning – ING

ING analysts note that in the week between 23-29 October, speculative investors continued cutting their net short positions in sterling, despite GBP/USD spot staying flat during the same period.

Key Quotes

“The dynamics are reflecting the sharp decline in the perceived odds of a hard Brexit and the subsequent weaker catalysts for a possible GBP decline. With the UK parliament election scheduled for 12 December and the Conservative party victory largely expected, the possible changes in polls that would indicate a higher probability of a hung parliament would likely lead to some renewed built up of sterling shorts.”

“Sterling net positioning is now -15% of open interest, perfectly in line with its five-year average. In our view, this indicates that GBP will less and less benefit from that short-squeezing effect that has been exacerbating upside moves in the past weeks.”