GBP: Scope for further upside is limited? - ING

The latest CFTC speculative positioning data puts GBP/USD net long positioning at 14% (of open interest) – which is the highest since 3Q14, but seeing a similar pattern for EUR/USD suggests that this may not necessarily be GBP-specific, explains Viraj Patel, Foreign Exchange Strategist at ING.

Key Quotes

“Looking more broadly, and taking into account real money flows, we point to the UK’s basic balance – and decline in the financial account (namely portfolio investment inflows) as evidence of slowing demand for GBP-assets over 2017. One would expect this to reverse in 2018 should the UK economy stay resilient and an orderly Brexit transpire. Therefore, we believe the broader market remains structurally short GBP – but to get any meaningful shift to more neutral positioning levels, investors will need to see a fundamental UK economic story emerge.”