Speculators are building up their short positions in GBP
Speculative investors are likely to bet against GBP, which will weaken in anticipation of Brexit deadline expiration in June for extending the transition period, reports ING. According to ING analysts, "short positions in the pound is recovering, it is associated with Brexit," as trade negotiations between the UK and the EU resumed, but the UK government "remains committed not to extend the transition period."
Concerns about the Brexit negotiations and the impact of coronavirus and quarantine on the UK's services oriented economy should put pressure on the pound against the dollar, BMO Capital Markets is confident. "The time of crisis in the negotiations between the UK and the EU regarding Brexit transition period has already come. The fact that a significant share of UK GDP is in the service sector could also be an important brake on the recovery," says BMO FX strategist Stephen Gull.