2 Recurring Votes Against GBP

The pound is stuck the proverbial rock and hard place. The rock is the Brexit vote and the dozens of unknowable outcomes to leaving the EU while the hard place is Scotland and talk of another referendum. One of the two Premium Insights  CAD longs was closed at 150-pip gain. The other remains +120 pips in the green.

On the weekend, PM Theresa May once again reiterated the UK is leaving the EU. She has remained steadfast despite occasional flaps of political trouble and she is increasingly warning that it won't be easy. May said that maintaining border control was non-negotiable even if it meant losing access to the single market.

At the same time, Scotland's Sturgeon is exploiting every opportunity to promise another referendum, especially once Britain leaves the EU.

The pound had made some headway on Wednesday and Thursday of last week but it was erased Friday and in early trading today in a sign that no gains will be easy gains for sterling. Later this week, UK trade balance and industrial production may briefly shift the focus back to fundamentals.

The first week of trading in 2017 was similar to 2016 in that CAD was the leader and GBP the laggard and that continues in early-Asian trading. Japan is on holiday to start the new week.

US dollar traders finally got back to fundamentals on Friday with the release of non-farm payrolls. The headline was a touch soft but upward revisions to November filled the gap. What the market is almost-entirely focused on, however, is salaries. Wage growth rose to the highest since 2009. That set off a rip in the US dollar. And with little on the US economic calendar this week, the uptrend in USD can reassert itself.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -70K vs -69K prior

JPY -87K vs -57K prior

GBP -65K vs -57K prior

CHF -13K vs -10K prior

AUD -3K vs -2K prior

CAD -4K vs -2K prior

NZD -11K vs -11K prior

The rush into yen shorts in the first week of the year and throughout December showed just how vulnerable the pair was and why the drop in USD/JPY was so violent last week. But it also shows the commitment of shorts and that's why the pair has stabilized with plenty of ammunition before it gets really crowded (at -150K or more).