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As hedge funds grow in the bright future of the British pound, the currency of the UK is gaining steadily and comes out on a clean first place in the G10 race for the title of best performer since the beginning of the year. As a result of the build-up of speculative net long positions on sterling to a high since August 2014, yesterday's favorites, the Japanese yen and the Norwegian krone, were left behind. The market ignored the weak statistics on industrial production and the loud statement by Brexit secretary David Davis that the parliament can not ratify the agreement with the EU if it contradicts the interests of Britain and pushed the GBP/USD to an 11-week high. Successes against the euro were much more hefty: for a long time the EUR/GBP pair pushed in from 0.865-0.9 and managed to get out of it and reach the lowest mark since May 2017.

The enchanting attack of the pound in the conditions of a practically empty economic calendar makes us shrug with surprise the shoulders of the "bears" and contently rub the hands of the "bulls". Commerzbank is puzzled, why does the sterling ignore Brexit news? It is likely that after the announcement of the transition period, the market accepted as the basic idea that London would in any case sag down before Brussels, so Davis' statement was perceived as the usual shaking of the air with his fists. ING confirms that the story of the divorce of the UK with the EU can now cause nothing but sentimental memories to evoke. Investors are sensitive only to the change in the probability of raising the repo rate.

The rise of GBP/USD against the backdrop of weak statistics on industrial production and a decline in the index of economic surprises in Britain to the lowest level since September shows that the market misses the negative and concentrates its attention on the positive. A clear sign that the conjecture is "bullish".

Dynamics of the index of economic surprises in Britain

Exchange Rates 17.04.2018 analysis

However, this may be a dirty trick. I would venture to assume that the rapid rally of the pound by the end of the week by April 13, which can hardly be called saturated with events of an economic nature, was a direct result of the formation of long positions by hedge funds on the positive expectations of the labor market, inflation and retail sales. It is the availability of these releases in the calendar that makes sterling the most interesting five-day currency by April 20. According to forecasts of Bloomberg experts, wages in the UK will accelerate from 2.8% to 3%, and inflation, on the contrary, will be stuck at around 2.7% y/y. The increase in real wages leads to an increase in the purchasing power of the population and makes it possible to draw the future of British GDP in light colors. If the data disappoints, then the implementation of the principle "buy on the rumor, sell on the facts" will provoke a correction.

Technically, the resistance break at 1.425, as expected, allowed the bulls to enter the operational space and push the quoted prices of the analyzed pair to 200% and 127.2% for the AB = CD parent and child patterns.

GBP/USD, daily chart

Exchange Rates 17.04.2018 analysis

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Performed by Marek Petkovich,
Analytical expert
InstaForex Group © 2007-2018
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