UK CFTC data shows GBP non-commercial net positions at -£43.1K. This is an increase from the previous -£63.9K.
The net short position has narrowed by £20.8K. The position remains negative overall.
The latest positioning data shows a significant change in sentiment for the British Pound. Speculators have sharply reduced their bearish bets, with net short positions decreasing by over £20 billion. This indicates that the intense selling pressure we’ve seen may be running out of steam.
This shift comes as UK inflation for April was reported at 2.1%, holding just above the Bank of England’s target and keeping rate cut expectations in check for now. With the UK economy showing fragile 0.2% growth in the first quarter, the market is sensitive to any signs of strength. The reduction in shorts suggests traders are less confident that weak data will force the BoE into immediate rate cuts.
We should remember the persistent weakness from the latter half of 2025, where concerns over a stagnant economy pushed the pound toward the 1.22 level against the dollar. That prolonged downturn created a crowded short trade. This current move looks like an unwinding of that very popular bearish position.
This short-covering could provide fuel for a continued rally in the coming weeks. We will be watching to see if GBP/USD can break and hold above the key 1.2750 resistance level. A sustained move above that point could trigger a further squeeze on the remaining £43.1 billion in short positions.
For options traders, this rapid change in positioning suggests an increase in near-term volatility. Implied volatility on GBP options has already ticked up by 0.5% this week, showing the market is bracing for larger price swings. This environment could make strategies that benefit from price movement, rather than direction alone, more appealing.
