Hedge funds haven t been this bearish on the pound since December 2021, and strategists say fears of a UK recession are to blame.
After going long for three straight weeks, leveraged investors moved to a net short position of 6,858 contracts in the week ended May 9, the Commodity Futures Trading Commission data show. The bets are coming as the International Monetary Fund warned the UK could be the only G - 7 country to slip into a recession this year.
There is a growing concern that the fight against inflation will come at an economic cost, said Rodrigo Catril, a strategist at National Australia Bank Ltd. in Sydney. The pound has been a good performer, and taking profit is also appealing. The pound's status as the best-performing Group-of-ten currency this year may come under threat as signs emerge that the BOE is getting ready to pause its tightening cycle. A weaker sterling would disprove the bullish bets of Goldman Sachs Group Inc. and Jefferies LLC, who are betting on more gains against the euro as British inflation continues to rise.
The pound traded at $1.2459 in Asia on Monday following a rally to a one-year high last week. The average forecast of a Bloomberg survey of analysts is for the currency to rise by the end of the year to $1.26.
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