June 1, 2020 / 8:11 AM / a month ago

Sterling rises above $1.24; short positions up for 12th week running

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv

LONDON, June 1 (Reuters) - The pound rose to three-week highs against a broadly weaker dollar in early London trading on Monday as Britain eased some lockdown restrictions, but the market’s net short position on sterling is the largest in more than five months.

New rules designed to ease the lockdown in England came into force on Monday, even though scientists warned that, in the absence of a functioning system to track new outbreaks, the move was risky.

The new rules do not apply to Wales, Scotland and Northern Ireland.

A fourth round of trade talks on relations with the European Union following Britain’s departure from the bloc will start this week. Britain has until July 1 to ask for an extension to the current transition period which is due to end in December.

The pound is being weighed down by a number of factors: Britain’s high COVID-19 death rate, a lack of progress in Brexit negotiations, a bleak economic outlook, and the Bank of England (BoE) considering negative interest rates.

“We expect the pound to continue to trade at weaker levels in the near-term unless there is a surprise breakthrough in Brexit talks and/or the BoE clearly rules out negative rates after completing their ongoing review of policy options,” Lee Hardman, currency analyst at MUFG, wrote in a note to clients.

Against a broadly weaker dollar, the pound hit a three-week high of $1.2425, up 0.6% on the day.

Versus the strengthened euro, the pound was last down around 0.1%, at 89.77 pence.

The market’s net short position on the pound increased for the twelfth week running in the week ending May 26, according to weekly positioning data.

The last time investors were this bearish on the pound was in the run-up to the December 2019 election. (Reporting by Elizabeth Howcroft; Editing by Mark Potter)

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