Sterling hit a three-week high against the dollar this morning, rising above $1.32 as speculators cut bets against it after data suggested Britain’s economy was holding up surprisingly well in the aftermath of the Brexit vote.
Data released by the Commodity Futures Trading Commission on Friday showed positioning is stretched, with sterling net short positions soaring to a record high of 94,238 contracts in the week to Aug. 16. Traders said some speculators were unwinding bets and booking profits.
Sterling rose as much as half a percent to $1.3210, its highest since Aug. 4. It rose 0.2 percent against the euro to hit 85.915 pence, its strongest in 11 days.
The pound was boosted last week by inflation and retail sales numbers for July that beat forecasts, adding to signs that consumers had yet to rein in spending following June’s vote to leave the European Union. Lower-than-expected jobless claims also lifted the currency.
Last month, the British managers’ indices plunged sharply. But recent labour market data has been surprisingly strong, which investors regarded as a sign that the economy has not suffered a severe setback, so far,” said Thu Lan Nguyen, currency strategist at Commerzbank.
Sterling hit a three-decade low of $1.2798 on July 8 and has been trading not far from those troughs on expectations that the Bank of England may have to ease monetary policy further in coming months.
Earlier this month, it cut rates to record lows and re-started an asset buying programme to cushion the economy from an anticipated post-Brexit slowdown.
The CBI industrial trends survey for August, due at 1000 GMT, is the second to be conducted since the EU referendum result. Last month, the balance of orders held up, and another decent reading should underpin the pound, traders said.