Analysts at CIBC, point out that positioning data suggests there is less room for sterling short positions to be pared and they warn the euro could appreciate significantly.
Key Quotes:
“A couple of months ago we noticed that net short positions held against fi ve major currencies were in the tightest range they had been in for a number of years. Since then, trends in positioning have diverged, with potential implications for our FX forecasts. Interestingly, sterling short positions have been pared back already, suggesting that our forecast for GBPUSD to move higher as Brexit uncertainty fades could be a little too bullish.”
“The heavy short positions against the euro support our view that the euro could appreciate markedly when (or if for the pessimists out there) economic data start to improve. Short positions against the C$ have held fairly stable over the period.”
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