Investors Bullish On GBP, Dollar Still Pressured
Currency Converter Calculator's Forex News Roundups aim to help traders and enthusiasts stay up to date with the latest happenings and developments in the global currency exchange market. Our coverage focuses on major currency pairs, but we also cover news and analysis related to Emerging Market (EM) currencies.
In this edition, we look at why investors are becoming increasingly bullish on the Great British Pound (GBP), and why the US Dollar (USD) is still under pressure and whether or not it's retaken its crown as the safe-haven investment of choice.
Traders Cut Back GBP Short Positions
The market has seen Forex traders significantly cut back their "short" positions against Sterling in recent weeks, as investor sentiment surrounding the Pound's future has become more positive.
Specifically, the number of active "short" positions against Sterling has fallen from 34 percent to just 28 percent over the past couple of weeks.
A "short" position is essentially a bet on the value of a currency falling, while a "long" position is a bet on it rising.
This shift in sentiment surrounding Sterling's value is partly due to investors expecting a favorable outcome from Brexit negotiations. Encouraging economic data, which suggests the UK economy is rebounding fairly well from the coronavirus-induced recession, also bodes well for the GBP.
All of this has led to the Pound performing strongly against the Euro (EUR) in recent weeks which itself has been on an upswing and gaining ground against the Greenback.
Investors 'Very Bullish' On the Euro
The number of "long" positions on the Euro is currently at an all-time high, demonstrating just how bullish investors are on the currency, which has performed well during the COVID-19 pandemic relative to other major currencies.
There's currently around $30 billion of net "long" Euro positions in the market, and it is currently trading at a two year high against the Dollar, at around 1.193.
According to FX analysts, this bullishness is due to the US Dollar struggling in recent months amid the coronavirus pandemic and escalating trade and political tensions with China.
Another reason for the Euro's current strength is down to the market expecting Europe to recover much more quickly from the pandemic than the US.
USD Remains Under Pressure
Despite posting decent gains earlier this month, the US Dollar is still under pressure, particularly against the Euro.
Democrats and Republicans are still a long way away from agreeing on a fiscal stimulus package to help the US economy mount a recovery. This is dragging on the value of the Greenback.
Meanwhile, analysts have suggested that the USD has reemerged as the preferred safe-haven investment after being dethroned by gold for a few weeks.
A Quick Summary
- Forex traders have considerably rolled back their "short" positions against the Great British Pound in recent weeks, as the market becomes much more bullish on the future of Sterling.
- This is down to investors expecting Brexit negotiations to go well for the UK, and they are also hoping for a swift economic recovery.
- Meanwhile, the number of net "long" positions on the Euro has reached an all-time high, with over $30 billion of long positions currently in the market.
- Lastly, the US Dollar remains under pressure despite going on a bull run earlier this month.
- This is partly due to the federal government's difficulty in agreeing the terms of a fiscal stimulus package to help kickstart an economic recovery, among other US-specific factors.