British Pound (GBP): A Dangerous Mixture of Heavyweight Data and Politics

With a slew of major economic reports and announcements expected to be released, cable traders will likely see a pick-up in activity after a sluggish beginning to the week with the United States commemorating Martin Luther King Day. On Tuesday, the recent jobs and income data (November) will be released. The December inflation figures will be released on Wednesday. The recent peek at the British high street with the December consumer spending report will be released during the weekend. Any of the 3 releases could influence Sterling, so keep an eye on them all.

The British Pound (GBP)

With the revelation of Sue Gray’s ‘partygate’ probe conclusions, UK Prime Minister Theresa May faces a pretty difficult week. The UK prime minister, Boris Johnson, faces mounting pressure from inside his party to quit. In contrast, others gather next to him and issue public declarations of allegiance in an organized operation dubbed ‘Operation Save Big Dog.’ While specifics are scarce, it appears that certain senior civil workers would end up losing their jobs due to the lockdown-breaking events to bolster up backing for the Prime Minister.

Last week, the GBP/USD pair quickly pushed through the medium-term decline, trading at a new multi-week peak of 1.3750 before drifting downwards. Although Sterling is presently strong, much of the growing shift in cables has been influenced by fluctuations in the USD’s value. Market positioning for the United States was massively long at the start of 2022, as views of economic tightness in the United States intensified.

The dollar has recently fallen as a few of these long bets have been undone, letting cable move on. The USD appears to have found a support level, and GBPUSD is currently more prone to be influenced by UK data and politics compared to US fiscal policy expectations. Cable offers good support all the downward to 1.3570, but the late-October triple high of 1.3835 could be hard to accomplish in the short run.

According to retail trader data, 40.46 percent of traders are net-long, with a short-to-long ratio of 1.47 to 1. The amount of net-long traders is up 8.54 percent from yesterday and down 8.88 percent from last week, while those who are net-short are up 5.11 percent from yesterday and up 6.67 percent from last week.

We usually take the opposite side of popular sentiment and the fact that traders are net-short on the GBP/USD signals that prices will keep rising. Positioning is net-shorter today than yesterday but net-shorter than the week before. We have a different mixed GBP/USD trading inclination due to current sentiment and previous adjustments.

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