Recent IMM data showed GBP/USD short positioning reduced for the 4th consecutive week as GBP/USD specs shrugged off lingering Brexit fears, lifting the pound from 1.2168 to 1.2288 versus the USD. But, that's not likely to last. Traders back from holidays, reacting to increased Brexit angst, have resumed sterling selling, pushing the pound down from Monday's high 1.2175 to today's 32-month low at 1.1959.
Though the pound has bounced off session lows it is likely the run of spec GBP/USD buying will end as the current IMM reporting period ends today, with GBP/USD having fallen from 1.2290 on Aug.
28 to current levels.
With parliament set to prevent PM Johnson from taking the UK out of the EU without a deal on Oct. 31, there are several possible scenarios in play including a Brexit delay, snap elections and no-deal exit.
The uncertainty surrounding the UK's political situation, even if a delay is won, has boosted GBP vol and will keep the BoE from hiking rates, regardless of economic data.
The move to new long-term GBP/USD lows likely saw some trapped GBP/USD longs 1096742NLNG exit and though new bottom fishers likely stepped in to buy at the lows, lingering Brexit uncertainties favor GBP bears and a run to Oct.
2016's flash low at 1.1491 nL5N25U1CO.
GBP Chart: Click here