Forex News

Bets for Falling GBP Likely Increase Further as Political Turmoil Heightens Brexit Uncertainty

As suggested in the CFTC Commitments of Traders report in the week ended July 3, bets for US dollar increased modestly on both sides. Speculative long positions for USD Index (DXY) futures added +2 399 contracts while shorts added +1 953 contracts, resulting in a Net LENGTH of 18 672 contracts, up mildly by +446 contracts from the prior week. The index barely changed during the week.

For European currencies, NET LENGTH for EUR futures gained +2 843 contracts to 36 747 for the week. Bulls reduced their bets, by -1 142 contracts, to 189 005, while bears decreased bets, by -3 985 contracts, to 152 58, for the week. GBP futures deepened into NET SHORT position, adding +7 300 contracts to 28 781. While the market has widely anticipated a BOE rate hike in August, renewed political turmoil (Foreign Secretary Boris Johnson resigned just 15 hours after resignation of Brexit secretary David Davis, over disagreement on Chequers plan) has greatly increased the uncertainty of Brexit negotiations. This has greatly increased the downside risk of British pound in coming months. On safe-haven currencies. Net SHORT for CHF futures rose +2 463  contracts to 40 494, while that for JPY futures rose +4 509 contracts to 38 730 during the week. Swiss franc and Japanese yen fell about -0.25% and -0.5% against the greenback during the reporting week.

All commodity currencies stayed in NET SHORT positions. NET SHORT for AUD futures dropped further, by -1 748 contracts to 39 230, while that for NZD contracts jumped +8 842 to 26 404 contracts. NET SHORT for CAD futures soared +16 649 contracts to 49 448. While AUD and NZD weakened against USD, CAD climbed over +1% against the greenback during the week.

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