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Deutsche Bank joins bears seeking shelter from resurgent pound
[LONDON] The pound's resilience following buoyant post-Brexit economic data is encouraging some sterling pessimists to rethink their short-term strategies.
Deutsche Bank AG has exited a bet for the UK currency to fall on a trade-weighted basis, while retaining its longer-term negative view. UniCredit SpA said it had closed a short pound- dollar position, or a wager sterling would weaken, to reduce "tactical" risk.
The pound rose for a fifth day against the greenback, its longest winning streak since March. Reports such as an index of August services, which jumped the most on record when it was published on Monday, give a more positive view of the UK economy in the wake of the June 23 vote to leave the European Union than many had predicted. To analysts, this reduces the need for the Bank of England to further expand its rebooted bond-buying program or to cut interest rates again when it announces policy on Sept 15.
"Recent data suggest the near-term confidence impact of Brexit may have been overstated, and with risks the BOE now sound a more sanguine note, we take profit on our May" recommendation to bet against the pound on a trade-weighted basis, London-based Deutsche Bank strategist Oliver Harvey said in a note. "This doesn't change our medium-term bearish outlook, however."
The pound extended its advance against a debased dollar after data showed America's service industries expanded in August at the weakest pace in six years.
Sterling jumped 1 per cent to US$1.3437 as of 4:15 pm in London, touching the highest since July 15. Deutsche Bank's index of sterling versus the currencies of Britain's biggest trading partners also extended its gain and headed for the highestclose since mid-July. The pound gained 0.2 per cent to 83.61 pence per euro, advancing for a sixth day.
Both Deutsche Bank and UniCredit cited risks involving Britain's negotiations for exiting the world's largest single market when explaining their pessimistic longer-term outlooks.