This week’s economic forecasts from the Bank of England are shaping up to be decisive for the remaining sterling bulls.
The pound strengthened against the euro today as investors prepared for clues from projections due in the central bank’s Inflation Report as to when it will begin raising interest rates. While sterling is the best-performing major currency in the past year based on Bloomberg Correlation-Weighted Indexes, large speculators including hedge funds last week cut bullish bets to the least since February. U.K. government bonds fell.
“In terms of key events this week, it would be the Inflation Report,” said Michael Sneyd, a foreign-exchange strategist at BNP Paribas SA in London. “Long sterling is one of the largest positions in G-10 FX, but this long-sterling positioning has been pared back the last couple of weeks,” he said, referring to bets on currency gains among Group-of-10-nation foreign-exchange rates.