What doesn't kill you makes you stronger, is what some bullish pound speculators might be thinking right now. When Brexit-related uncertainty was at its peak towards the end of last year and in early parts of 2019, the GBP/USD and other pound crosses fell sharply across the board. Yet, since the turn of the year, the GBP/USD has actually been pushing higher despite the bears throwing the kitchen sink at the beleaguered currency. With the worst-case scenario, which is a no-deal Brexit all but ruled out, anything else should be good news for the pound.
For this reason, I can’t see why the GBP/USD should create a new low for the year sub 1.2440. If anything, I am expecting the exchange rate to appreciate going forward after its recent pullback from the 1.3380 peak, as speculators price out the prospects of a messy exit from the EU. In fact, according the latest positioning data from the CFTC, the GBP has flipped to net long for the first time since June 2018, as per my colleague Matt Simpson’s article HERE.
This is potentially good news and if we see financial speculators further expand their bullish bets on sterling, then we may see the GBP/USD start to move decidedly north of the pivotal 1.30 area over the coming weeks. Indeed, there’s plenty of time from now until the new “Halloween” Brexit deadline of 31st October for the GBP/USD to move around in its existing wide range, with the next move likely to be higher – in our view – for the reasons stated above.
The key risk to this outlook is if the dollar were to sharply extend its rally, which we can’t rule out given that the Dollar Index is sitting right below the key 97.70 resistance level ahead of the publication of US GDP on Friday.
Source: TradingView and FOREX.com.