LONDON, Sept 28 - The core narrative keeping cable offered remains intact. Global bond yields continue to push higher, which ahead of the October 28 UK budget, will continue to raise concerns around the Chancellor’s limited fiscal headroom. Meanwhile, with little evidence of a notable improvement in energy prices in the near-term, markets will continue to expect a Bank of England rate hike at the November meeting.

For GBP, this combination will leave the broader downtrend in place. This is reflected in the latest CFTC data, given that net GBP shorts rose over 40% to now sit close to recent extremes and levels that have previously marked turning points. In turn, this creates an asymmetry, because, while the near-term setup will remain lower in the budget, the fast build-up of positioning could provide fuel for a sharper post-budget squeeze if the fiscal and geopolitical backdrop improves.

For now, this catalyst is absent and any pre-budget rebound is unlikely to prove a durable one, unless supported by any credible de-escalation between the US and Iran. That said, the path of least resistance is therefore lower, which should keep pressure on initial support at 1.3200, where a break would open up the 2026 low at 1.3140.
GBPUSD positioning

Justin McQueen is a Reuters market analyst. (The views expressed are his own) ((Email: ))