The pound held firm in the $1.36 range this week, with market participants noting a reduction in pound short positions. The latest CFTC data showed that the net short position had declined, while developments in the UK fiscal position could affect the market going forward.
Sterling is trading near the upper end of the $1.36 range today, while GBP/JPY has recovered from the mid-216 range to the upper end of the range. The pair has remained above its 100-day moving average.
According to the latest data from the Commodity Futures Trading Commission, the pound's net short position narrowed in the week through 18 August, falling to roughly half its June level. Speculators are said to have reduced positions betting on a decline in the pound.
Meanwhile, some market participants believe the UK budget scheduled for October could focus attention on constraints on fiscal spending. There are also concerns that any response other than a focus on fiscal discipline could heighten concerns about both UK government bonds and the pound.
Despite the impact of the conflict involving Iran, the resilience of the UK economy has been noted, and market participants believe the pound's relative strength is being maintained in the foreign exchange market.