Francesco Pesole, FX strategist at ING, explains that CFTC data referring to the period 9-16 October surprisingly shows a flattish development in GBP/USD net speculative positioning, despite a significant sterling rally in the same period (approximately +4% vs USD), triggered by hopes of a new Brexit deal.

Key Quotes

“We might need to wait for next week’s data to witness some “short-squeezing” effect, but for now, a still extensive short market positioning (-30% of open interest) on GBP tends to suggest more upside room for the currency.”

“Nonetheless, caution on the pound is still much warranted, given that the hurdles to have a deal approved (and ratified) by the UK parliament remain firmly in place.”