Short positions in the pound continue be rather stretched
Last week's CFTC data revealed that the short positions (as of 23 July) in the pound are at their most stretched since September last year. And with the pound falling further to fresh two-year lows today, short positions will no doubt have grown since then.
Amid increasing chatter of a no-deal Brexit, the BOE starting to shift towards being more dovish and the UK economy possibly on the brink of a technical recession, it's hard to find any positives for the pound at the moment.
Hence, short positions being overcrowded is possibly the only silver lining for the quid as we move towards the 31 October Brexit deadline.
However, even in the event of any short squeeze, it will not do much to keep the pound afloat as long as the prospect of a no-deal Brexit continues to stay alive.
Boris Johnson seems adamant to deliver on the deadline - regardless of how negotiations play out - and that will present a significant risk for the pound to fall further from current levels if UK lawmakers are unable to stop him in the coming weeks.
Even if they do, there's also further political uncertainty that may result as Johnson could call upon an election to try and put an end to all of this mess.
In short, it's not looking good for the pound in the summer and there might not be much reprieve even as we look forward to autumn.
