Despite broad dollar weakness amid falling UST yields and lingering global trade tensions the pound remains subject to intense Brexit risk.
A look at the most recent IMM spec positioning confirms that as USD positioning stalls just below recent highs, the pound remains offered as mounting UK political uncertainties led to a significant rise in GBP shorts in recent weeks.
The current week saw IMM spec short positioning in GBP/USD rise 5,844 contracts to -31,996, an increase of approximately $453 million in the May 22-28 reporting period.
The total net change in USD positioning was $478 million, during that period, making GBP/USD responsible for 95% of the fluctuation in overall long position.
With little change in positioning last week in EUR/USD and USD/JPY -- the two most liquid currency pairs -- and also AUD/USD ahead of a widely expected rate cut, GBP/USD specs appear exceedingly motivated to rebuild shorts.
Friday's low at 1.2560 and the lower 30-day Bolli at 1.2511 may only be speed bumps as UK political and Brexit angst opens the way for early January's 2019 low at 1.2409 and beyond.