Macro Funds “Losing Patience” With British Pound; Trump Comments, UK Treasury Provide Little Relief

Sunday was all about Brexit.

The stage was set for cable to collapse today after The Sunday Times ran a piece that gave the world a sneak peek at PM Theresa May’s plans for a “clean and hard” split with the EU. May is expected to provide details at a speech on Tuesday.

Sterling was already under quite a bit of pressure having fallen to its lowest levels since late October on increasing market angst. As both Barclays and Bloomberg noted, the pound typically doesn’t do well when May opens her mouth.

pound

(Chart: Bloomberg)

In early Asian trading, GBPUSD dipped below 1.20 for the first time since the flash crash in October.

gbpo

The headlines are still coming in as we into the overnight session. GBP crosses are under pressure “even though investors caught the move,” on trader told Bloomberg, adding that “leveraged and macro clients positioned short GBP last week after May announced Tuesday statement was forthcoming.” No one, apparently, is closing out their shorts.

Macro funds are losing patience, another trader said, noting that “accounts have been selling GBP/USD under 1.2020 in the absence of any relief rally” as the “market is top-heavy with offers between 1.2050-1.2150.” Some funds are adding to their shorts.

The currency did get a bit of respite from Donald Trump (who else, right?), who told The Sunday Times that Brexit will “end up being a great thing” and promised “to work very hard to get [a trade deal with the UK] done quickly and done properly.”

“I love the UK,” Trump added, for good measure.

We also got this…

  • UK TREASURY SAID TO PLAN TO SPEAK TO BANKS AFTER MAY’S SPEECH

…which seemed to reassure the market…

  • GBP/USD PARES LOSSES AFTER TREASURY REASSURANCE, TRUMP COMMENT

… but not by much…

  • GBP/USD failed to make a new intraday high even as U.K. Treasury is preparing to reassure banks after Prime Minister May’s speech on Tuesday, according to an Asia-based FX trader. Some clients also cited Times’ interview with U.S. President-elect Trump that he will offer U.K. a “fair” trade deal, which added marginally to squeeze, fund-related selling above 1.2050

It should be an interesting week.

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