Non-commercial participants, sometimes described as “speculators”, are now running a record number of short positions in the pound against the dollar, according to US data. However, this alone does not mean that sterling is likely to fall further. For a start, other participants have offsetting long positions. What’s more, this is selling that has already taken place. History suggests that extreme speculative positioning (in either direction) is often followed by a sharp reversal. Indeed, any future recovery in the pound might actually be accelerated as speculators scramble to buy the currency back.
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