Hedge Funds Bet on Stronger Pound Before Brexit Talks Collapsed
Hedge Funds Added Long Pound Bets Before Brexit Talks Collapsed
Hedge funds boosted long bets on the pound to the highest in over five months just before talks between the U.K. and European Union took a turn for the worse.
Net futures and options positions held by leveraged funds rose to 10,173 in the week through Sept. 8, the highest since March 24, according to data aggregated from the Commodity Futures Trading Commission.
The moves came just before Prime Minister Boris Johnson’s government rebuffed an EU request to scrap his plan to re-write the Brexit divorce accord. Asset managers took the opposite approach, boosting their net short positions in the same period.
“The market had been lulled into a false sense of security on Brexit because the pound had done so much better,” Laura Fitzsimmons, JPMorgan Australia’s executive director of macro sales, told Bloomberg Television. “But that was a dollar weakness story and it’s now coming home to roost.”
Tension between the U.K. and EU last week jolted investors enough to spur the biggest selloff in sterling since March and increase bearishness toward the currency by the most in five months, according to risk reversals. That signals just how nervous traders have become about Brexit, but it also makes bets the pound will advance relatively cheap.
Read More: Surge in Bets Against Pound Offers Value for Fading Brexit Risks
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