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Asia AM Digest: British Pound Drops as Tory MPs Challenge PM May

Asia AM Digest: British Pound Drops as Tory MPs Challenge PM May

Research, Research Team

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The British Pound is facing broad-based selling pressure at the start of the trading week following a report that as many as 40 Conservative Party MPs agreed to sign a letter of no confidence in Prime Minister Theresa May. That is almost enough to trigger a leadership challenge and casts a cloud of uncertainly around already stalled Brexit negotiations.

Meanwhile, the US Dollar is tracking broadly higher having mounted a recovery after hitting a one-week low on Friday. The currency is rising alongside benchmark 10-year Treasury bonds while yields are falling, hinting that the greenback has reclaimed a degree of safe-haven appeal as sentiment sours across Asia Pacific bourses. Regional shares are trading broadly lower.

DailyFX Economic Calendar: Asia Pacific (all times in GMT)

Asia AM Digest: British Pound Drops as Tory MPs Challenge PM May

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Asia AM Digest: British Pound Drops as Tory MPs Challenge PM May

IG Client Sentiment Index Chart of the Day: GBP/USD

Asia AM Digest: British Pound Drops as Tory MPs Challenge PM May

CLICK HERE to learn more about the IG Client Sentiment Index

Retail trader data shows 51.6% of traders are net-long GBP/USD, with the ratio of traders long to short at 1.07 to 1. In fact, traders have remained net-long since Nov 01 when GBP/USD traded near 1.30522; price has moved 1.2% higher since then. The percentage of traders net-long is now its lowest since Nov 02 when GBP/USD traded near 1.30522. The number of traders net-long is 19.1% lower than yesterday and 33.5% lower from last week, while the number of traders net-short is 6.0% higher than yesterday and 29.7% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.