Pound Rallies as Risk Assets Jump, but Brexit Worries Will Resurface, JPM Says

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GBP/USD rose 0.67% to $1.2649.

Cable has found its footing since falling three weeks in a row since June 21 with the currency pair, trading as a risk asset, rising in tandem with U.S. equities. This correlation is understandable as the U.K. is “the largest capital importer within G10,” JPMorgan said.

But as equities move into range-bound trading, and the Brexit process comes to a head in the next few months, it is likely to “expect that GBP will become rather less dependent on general risk sentiment, and hence start to decouple from other high-beta currencies,” the bank added.

The latest jump in the pound comes even as further reports suggest that the risk of the U.K. leaving the European Union without a deal continues to gather pace.

As the UK and EU resumed talks on a deal in London on Monday, former President of the EU Commission Jean-Claude Juncker reportedly claimed that U.K. Prime Minister Boris Johnson was “purposefully” pushing for a no deal Brexit.

The pound has also been bolstered by ongoing signs that demand for the dollar remains in the doldrums.

Net shorts (bearish positions) on the dollar climbed 9% in the week ended 14 July, the highest level in the last three weeks, according to Commodity Futures Trading Commission (CFTC) data.

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