Hedge funds went into last week's Bank of England's policy meeting the most positive on sterling since July, but many will have been burned by the Bank's surprise decision not to raise interest rates.
The Bank's 7-2 vote to keep its key lending rate on hold at 0.10%, convulsed UK markets, sent shockwaves through global markets, and has quickly gained notoriety as one of the most glaring examples of policy 'misguidance' in recent years.
That was the largest net long since early July, and the biggest bullish bet on any G10 currency against the U.S. dollar, the data show.Many of those positions will have been wiped out by the pound's slump after the decision. The sterling/dollar exchange rate, known as 'cable', fell 1.4% on the day, its biggest fall since August last year, and trade-weighted sterling had its worst week in 11 months.
With relative interest rate support diminishing, strategists at Nordea opened a new short position in cable, and make no secret of why. "The Bank of England are flip-flopping without credibility," they wrote on Sunday.
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