British Pound (GBP) Outlook Remains Positive Going Into The Long Weekend

Recent commentary from Gertjan Vlieghe, an external member of the Bank of England’s MPC, has underpinned Sterling against a range of currencies as the markets drift into a long weekend. Vlieghe suggested that the central bank may look at hiking interest rates in the first half of next year if the UK labor market continued to improve. While employment prospects continue to improve, the UK furlough scheme is set to expire at the end of September, and policymakers will want to see if the market remains buoyant when this program ends.

Ahead of a long weekend in both the UK and US, GBP/USD is quoted around 1.4195, within striking distance of the multi-year 1.4242 high posted in late February. The chart suggests that this high will be tested again soon, with the multi-month uptrend still in charge of the pair. Retail trade data – see below – also points to higher prices with traders increasing their short GBP/USD positions over the last week.


British Pound (GBP) Outlook Remains Positive Going Into The Long Weekend

Retail trader data show 29.30% of traders are net-long with the ratio of traders short to long at 2.41 to 1. The number of traders net-long is 27.79% lower than yesterday and 16.22% lower from last week, while the number of traders net-short is 21.23% higher than yesterday and 10.14% higher from last week.

British Pound (GBP) Outlook Remains Positive Going Into The Long Weekend

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

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