What’s on the Horizon for the British Pound?
Carney’s comments boost the pound
Hawkish comments from the Bank of England’s governor, Mark Carney, helped the British pound (FXB) rally against its trading partners in the week ended June 30, 2017. The British pound (GBB) appreciated ~2.4% against the US dollar (UUP), closing above the 1.30 mark for the week ended June 30, 2017.
Carney noted in a speech that interest rate hikes might have to be discussed in the near future as the UK economy (EWU) is close to full capacity. Such a hawkish statement after the 5–3 vote in the previous Bank of England’s rate-setting meeting made currency traders aggressively bid for the British pound.
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From the political front, British Prime Minister Teresa May secured a slim majority to retain her position. This turn of events added to the positive sentiment for the British pound.
Traders remain cautiously bullish
According to the Commitment of Traders report released by the Commodity Futures Trading Corporation, currency traders maintained a net short position on the British pound.
On June 27, 2017, the total speculative net short positions stood at 39,133 contracts compared to 37,604 contracts in the previous week.
Pound in the week ahead
Along with the positive developments in the previous week, next week’s PMI reports from the manufacturing and service sector could add to the positive sentiment for the British pound.
Minor political uncertainty continues to threaten the pound’s recovery, but investors could remain cautiously optimistic about the UK economy (IEV) and the British pound.