Speculators’ net GBP longs are now at their highest level since July 2014. For a currency like the Pound which still suffers from a weak line up of economic fundamentals, positioning could be looking a little stretched.

In the second half of June, GBP lost ground against both the USD and the EUR, suggesting a reluctance on the part of investors to continue to build GBP longs. Despite widespread expectations about the potential extent of BoE rate hikes in the month ahead, in our view, GBP’s upside will be limited by concerns that tighter monetary policy also enhances growth risks. As demonstrated on several occasions last year, BoE rate hikes do not always lift the Pound.