November 11, 2019 / 9:27 AM / a month ago

Sterling firms to $1.28 ahead of GDP data; short positions extend decline

* Graphic: World FX rates in 2019

* Graphic: Trade-weighted sterling since Brexit vote

By Elizabeth Howcroft

LONDON, Nov 11 (Reuters) - The pound rose 0.2% against a weakened dollar on Monday ahead of a flurry of UK data, including GDP figures which are expected to show economic activity rebounded in the third quarter of 2019.

UK September Gross Domestic Product (GDP), manufacturing production, industrial output and goods trade balance data are all due at 9.30 GMT. All three are expected to be weak but not move the pound significantly.

Analysts said Moody’s decision on Friday to lower the outlook on Britain’s Aa2 rating to negative from stable did not move the currency as it provided no additional insight. The move means there’s a one-in-three chance the rating will be cut in the next 18 months to two years [nL2N27O1Y7.

Versus the dollar, the pound was up 0.2% at $1.2806, down over a cent from the previous Monday’s open. Sterling strengthened around 0.13% against the euro, trading at 86.11 pence.

“As we saw last week, the Bank of England raised their forecasts for growth in Q3 - they think that activity rebounded more than initially expected,” MUFG currency analyst Lee Hardman said.

“The market is looking for confirmation of that in the data today,” he added.

Data on Monday showed British employers’ hiring plans have risen from an 18-month low, an unusually upbeat sign for the labour market.

The pound may also have been boosted by reports over the weekend that Nigel Farage’s Brexit Party is considering withdrawing some candidates to make it easier for the Conservative party to secure a majority in next month’s general election.

This offered some support for the pound, MUFG’s Hardman said, as it would clear the way for the Conservatives to pass their Brexit withdrawal deal.

Weekly futures data showed that positions betting against the pound versus the dollar fell in the week to Nov. 5 to $2.338 billion, a 5-1/2 month low, according to CFTC weekly futures data on Refinitiv.

The net short position means that the pound has more potential to appreciate on good news than depreciate on bad news.

Sterling-dollar implied volatility gauges with one-month maturities - expiring just before the Dec. 12 election - fell slightly, but were still up from the three-month lows hit last week. (Reporting by Elizabeth Howcroft Editing by Peter Graff)

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