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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

Get the Asia AM Digest every day before Tokyo equity markets opensign up here!

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.

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