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Extension of Article 50 prompts market participants to take the beaming view of Britain prospects.
Traders in currency market turning optimistic on the sterling prospects for first time in the last one-year as Britain economy jolted on account of hard Brexit, has proved to be stronger than many estimated.
Earlier, fund managers at Hedge fund firms were extremely bearish on the pound and speculating on the further plunge in the legal tender. Brexit referendum that took place in June 2016, has invoked sell stamped in the currency.
Fund managers turned positive on sterling after recent data revealed that the UKâs economy was 0.3 per cent stronger in the three months ended to Februaryâ19 than in the previous quarter. Also, the retail sales figures were stronger in March than expected.
 Currency Head at State Street Global Advisor, James Binny said that "if you close your eyes and forget Brexit, Britain economy is indeed performing quite well, and the sterling remains very cheap as compared with the majors.â
However, increasing leadership challenges in the conservative party and growing chances of a general election, keeping many currency analysts in caution. In spite of strong macro-economic data from Britain, though, only a few speculators are willing to pile into positive bets on the sterling.
But in last week the ratio of the call to put position exercised by the currency traders turned slightly in favour of positive bets for the first time since June 2018, as per the data revealed by the US Commodity Futures Trading Commission.
Sterling Performance â 1 Year
Daily price chart (as on April 25, 2019, at 09:33 AM GMT). (Source: Thomson Reuters)
In past one-year, Sterling plunged by 9.6% against US dollar, and also at the current spot price relative strength index of Sterling stood at 19.91, which indicates that currency has oversold in the forex market and a potential short-term recovery could be seen.
Sterling has registered a 52w high of 1.3998 and a 52w low of 1.2441 against the US dollars, and at the spot rate sterling was trading 7.51% below the 52w high level and 3.57% above the 52w low level.
Fund managers at Hedge Funds have been paring their bearish bets on the pound since the mid of March, when it became clear that the Brexit would miss the March 29 deadline. Post-European Union member countries extended Article 50 for another six months, fund managers turned positive on the weaker sterling and speculating on a positive upside movement in the currency.
At the current scenario, market participants are watching closely if BoE is giving any hawkish signals about the potential rate hike in August. BoE meeting is scheduled in the next week.
