$5 billion bet on the British pound surging, approaching the key psychological level of 1.30
The British pound is currently trading strongly, approaching the psychological barrier of 1.30. Around $5 billion is being bet on the pound to rise further. The pound is more attractive compared to other currencies, as the optimistic sentiment of the Labour Party's new government and the improvement in economic growth have dampened expectations of an interest rate cut. The Bank of England has postponed the timing of an interest rate cut. The UK's economic growth has exceeded expectations, bringing encouragement to the British Prime Minister. Next week, the UK will release inflation data for June, which may test the bullish trend of the pound
According to the Smart Finance APP, the British Pound is trading at its strongest level in a year, consolidating its leading position among the G10 group. Strategists from Goldman Sachs and Pictet both expect further appreciation in the future. As of the time of writing, the British Pound against the US Dollar is at 1.2959, approaching the key psychological level of 1.30 that Goldman Sachs predicts could be reached within two weeks. Position data from the Commodity Futures Trading Commission (CFTC) shows that around $5 billion is being bet on further appreciation of the currency, as the Pound is expected to record its best monthly performance since November last year.
Compared to other major currencies, the British Pound appears particularly attractive. The optimistic sentiment surrounding the new Labour government contrasts sharply with the political uncertainties emerging in France and the United States. As other countries lean towards loose monetary policies, the improvement in economic growth has dampened expectations of rate cuts, prompting the Bank of England to delay the timing of rate cuts.
Janet Mui, Market Analyst at Brewin Dolphin of Royal Bank of Canada, said, "This is a huge change compared to the past disdain for the Pound."
The latest boost to the Pound came on Thursday when the slowdown in US inflation highlighted the possibility of the Federal Reserve cutting rates before the Bank of England. Economic data released on the same day showed that the UK's economic growth in May was twice the expected rate, bringing encouragement to UK Prime Minister Keir Starmer.
Michael Hart, Senior Currency Strategist at Pictet Wealth Management, said, "People may or may not agree with the Labour Party's plans, but at least some of them are clear." He turned bullish on the Pound last week before the vote and plans to review this view in three months, "We are optimistic about the Pound in the short term."
Meanwhile, next week the UK will release inflation data for June, which could test the bullish sentiment towards the Pound.
Valentin Marinov, Head of G10 Currency Research at Credit Agricole, stated that any significant signs of a slowdown supporting rate cuts "could hit Pound sentiment."