British pound held its breath
The British pound (FXB) appreciated by 0.17% against the US dollar (UUP) for the week ending November 17. The pound (GBB) closed for the week at 1.3, managing to weather the Brexit and political uncertainty. Brexit negotiations saw progress, and the political corridors remained silent last week. Economic data was mixed with inflation and wage growth slowing in October and retail sales improving 0.3%. Bank of England Governor Mark Carney shared his view that interest rates would need further tightening in the future to prevent the British pound from falling. British equity markets (BWX) remained under pressure in sync with global markets, and the FTSE 100 Index (EWU) posted a close of 7,380, down 0.70% for the week ending November 17.
Speculators turned bearish on British pound
As per the latest Commitment of Traders (or COT) report released on November 17 by the Chicago Futures Trading Commission (or CFTC), speculators have moved back into net bearish positions on the British pound. The total outstanding net positions were 4,533 short contracts as compared to 9,198 short contracts in the week before. The key reason for the reduction in the short positions could have been the weakness of the US dollar rather than any inherent strength of the British pound.
Week ahead for the British pound
The week ahead is a relatively quiet one for the UK, as no major economic data releases are scheduled. British Chancellor Philip Hammond’s autumn budget statement on Wednesday could be of some interest to traders. US dollar demand and fluctuations from the wobbly euro troubled by the failure of coalition talks could be the main driver for the British pound this week.
In the next part of this series, we’ll look at why the Japanese yen appreciated against the US dollar last week.