British pound depreciated 2.0% last week
The British pound (FXB) depreciated more than 2.0% against the US dollar for the week ended October 6, 2017. The pound (GBB) posted a weekly close of 1.3066, depreciating 2.5% against the US dollar (UUP). Economic data consisting primarily of PMI (Purchasing Managers’ Index) reports, showed an expansion in the services sector and a contraction in the manufacturing and construction sector. The data on their own don’t seem to be the reason for the pound’s fall in the previous week. British Prime Minister Teresa May spoke at the Conservative Party meeting, which was interrupted by a comedian and her coughing fit. The pound’s reaction to this was surprisingly negative. Could it be that traders were just searching for a reason to sell?
The British equity markets (BWX) traded on a positive note last week, and the FTSE 100 index (EWU) posted a close of 7,522, a 2.0% rise for the week ended October 6, 2017. It’s important to remember that most of the FTSE 100 companies have earnings in currencies other than the pound, and a weaker British pound improves their competitiveness.
Speculators continue to remain bullish
According to the latest Commitment of Traders report released on October 6, 2017, by the CFTC (Chicago Futures Trading Commission), speculators remained bullish on the British pound for the second week in a row. The total outstanding net positions were 19,949 long contracts compared to 5,054 long contracts the previous week. Speculator positions were net bullish for the first time in 22 months in the previous week.
Week ahead for the British pound
The economic calendar in the United Kingdom remains light. The important data include the UK industrial production and manufacturing production figures on Tuesday, October 10, 2017. Demand for the British pound could be driven by external factors such as the US dollar and the euro this week.
In the next part of this series, we’ll see how the Japanese yen continues to depreciate as election uncertainty looms in Japan.