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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)
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IG Client Sentiment Index Chart of the Day: GBP/USD
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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.
Five Things Traders are Reading
- Weekly Trading Forecast: Volatility Ahead on Key Data, US Tax Cut by DailyFX Research
- Weak Volatility Actually Weighing Wall Street, FX Traders Await Central Bank by John Kicklighter, Chief Currency Strategist
- A Weekly Technical Perspective on DXY, AUD/USD, USD/CAD & Crude by Michael Boutros, Currency Strategy
- GBP/USD Resilience to Persist Ahead of U.K. CPI, Slew of BoE Rhetoric by David Song, Currency Analyst
- U. of Michigan: Will Income Gains Be Sufficient to Outweigh Rate Hikes? by Dylan Jusino, DailyFX Team
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