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New Weight on the Pound

London
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London

If you have been monitoring investors' positions on the British pound, you could have been excused for thinking the sun would never really set on the British empire.

Despite anemic economic reports and stubborn inflation, investors have maintained net long positions in the British pound. But that changed in the week ending February 12, according to the latest report on traders' commitments.

The report showed a big swing from a small net long position in the pound to a short position of 16,776 contracts. The only bigger short position in the latest report was against the yen.

"The pound has suffered recently on account of economic gridlock in the face of austere budgetary measures," says Andrew Wilkinson of Miller Tabak. "The Bank of England must tolerate above target inflation and the recovery is having a hard time gaining traction."

Camilla Sutton, chief currency strategist at Scotiabank, says the net short positions were building into the Bank of England's latest inflation report. And the short positioning, she says, is a sell signal.

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