RationalFX: With investors all looking ahead to Thursday’s Bank of England (BoE) policy meeting, the pound appears to have stalled.
Investors seem reluctant to dive into the currency ahead of the meeting, especially as it coincides with the release of the quarterly Monetary Policy Report.
This reluctance saw the pound drop against its major peers yesterday as investor positions turned increasingly bearish. The net bet against the pound rose $298mil last week as long positioning dropped sharply. The fall in value and erosion of the market long bets on sterling is in line with the slowdown in UK business activity and the recent third wave of the pandemic.
This positioning means there’s no longer as much resistance to gains should BoE policy be more hawkish than expected. For most of 2021, sterling has been an investor favourite and the gains have actually been capped by the saturation of its popularity. However, no significant changes are expected and the attention is likely to be on whether the bank readjusts its economic forecasts and forward guidance on interest rates and the purchasing programme.
The most hawkish of forecasters are predicting the bank to raise interest rates in the first half of 2022, anything along these lines will certainly see fresh sterling strength.
Source : ETFWorld.co.uk