LONDON Sterling rose towards $1.30 again on Monday, with figures showing that speculators have cut bearish bets on the currency by the most in more than a year and the third most on record.
The overwhelmingly negative view on the pound dominating foreign exchange markets since the Brexit referendum in June last year has abated since British prime minister Theresa May called a snap general election a month ago.
Sterling was up 0.3 percent against the dollar in mid-morning trade on Monday to $1.2925, and the euro was down 0.2 percent at 84.60 pence.
Many sterling “bears”, including big currency trading banks like Deutsche Bank and Bank of America Merrill Lynch, ditched their ultra-gloomy forecasts and the data shows many playing the Chicago futures markets have done the same.
“It may be more to do with lethargy than any optimism. The pound is not moving much, volatility has collapsed, and the election has stopped the bad Brexit headlines … for now,” said Steve Barrow, head of G10 strategy at Standard Bank.
Data late on Friday showed that International Money Market accounts on the Chicago Mercantile Exchange slashed their net short sterling position to 46,798 contracts in the week to Tuesday. That effectively means bets on sterling falling are the smallest since July last year.
The change of 34,566 contracts from the previous week was the third biggest position move in favour of the pound since IMM records began in the mid 1990s.
Net short positions have more than halved from the record 107,117 contracts at the end of March, with the bulk of that reduction coming after May’s announcement on April 18 that the country will go to the polls on June 8.
“Capitulation is the driver. Bears are giving up,” said Kit Juckes, head of FX strategy at Societe Generale in London.
The latest poll on Monday from Survation showed that May’s ruling Conservative Party is on course to win 48 percent of the vote on June 8, with Labour a distant second on 30 percent.
The IMM figures don’t take into account any shifts since the Bank of England’s quarterly inflation report on Thursday. Governor Mark Carney warned of the downside risks to the UK economy, but said he and his colleagues are still banking on a “smooth” Brexit.