Crédit Agricole Reopens Short Position Against Pound Sterling Citing Overvaluation

Crédit Agricole's foreign exchange analysts have reopened their short position against the Pound Sterling, despite last week's loss of 0.29%. The bank argues that the GBP remains overbought and is positioned for a possible decline.

The model used by Crédit Agricole, G10 FX PIX 3.0, indicates that the Pound Sterling is overvalued, according to the bank. This positioning trade has a one-week horizon and a +4% return objective, with a -2% stop-loss in place.

Crédit Agricole's model has a 12-month return of minus 2.24% and a hit ratio of 46% per trade. The bank reports that the signal is mixed beneath the surface, with Pound Sterling attracting buying from futures-market participants and real-money investors last week, but banks, corporates, and hedge funds were net sellers.

The new position is being taken against a firm market backdrop, as GBP/USD has gained across the past five sessions. The bank's analysts are waiting for positioning to normalise over the coming week before the model's minus 2% stop-loss is reached.