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Why are hedge funds placing negative bets on the Sterling?


Leon Mathias

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Britain is currently going through a phase of uncertainty on both the political front, with Prime Minister Theresa May announcing her resignation as the leader of the Conservative Party from June 7th, and with the ambiguity surrounding the country’s exit from the European Union. While Boris Johnson and Nigel Farage are among the frontrunners for the top job, their leadership on how they steer Britain to a decisive break from the EU is likely to be tested in the sharply divided House of Commons.

Earlier today, UK’s manufacturing PMI slipped into contraction for the first time since July 2016 with new orders and new export business both slumping at the fastest pace in three and four and a half years respectively.

Against this backdrop, hedge funds are stepping up their short positions on the sterling. Although the UK’s currency has managed to pull back from the 5-month lows of last week, short positions on the sterling are increasing at their fastest rate since March 17th, reflecting the growing concern on the outlook of Britain's economy.

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