By Yasin Ebrahim
Investing.com – The pound looked set to snap a three-week winning streak on Friday, as data showed traders were beginning to unwind some of their bullish bets on growing expectations that the Bank of England may soon cut rates into negative territory to support the recovery.
fell 0.04% to $1.3557, and is on track to post a weekly drop for the first time in four weeks.
CFTC positioning data, released Friday, showed that speculators trimmed their net long position on sterling in the week ended Jan.5, by 1,000 contracts, to 4,000.
While the UK-EU trade deal has brought a semblance of visibility for the economy, the unrelenting spread of the virus has forced fresh lockdown measures that will set the recovery back.
“Harsh lockdown measures will continue for at least another month, which should make for a second consecutive pullback in GDP in Q1/21,” RBC said in a note.
Faced with a slower than expected recovery, the Bank of England will emerge as one of the first major central banks to cut rates this year.
“Most central banks are in a holding pattern at the moment and will evaluate the need for any tweaks to their asset purchase programs this year. But with the UK economy facing a longer road to recovery, we think the BoE will increase stimulus this year with a move to negative rates,” RBC said.
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