Is Sterling’s nonstop ‘Bull Run’ stalled? Deploy short hedge if bearish

BoE inflation report: The Bank of England's Inflation Report may provide contradictory signals. The Inflation Report finalized in advance of the upcoming labour market statistics seems poised to send a dovish message.

Unemployment rate: Ongoing contraction in the labour market is more likely to spot the unemployment rate at 5.5% while earnings growth accelerates, rising to 2.1% on the ex-bonus measure.

MPC actions unlikely: With a steeper yield curve weighing on the medium-term inflation projections and an appreciation of sterling, the Monetary Policy Committee seems unlikely to hint that the current loose stance of monetary policy should imminently change, not least against a backdrop of European event risk and uncertainty prospects for Fed tightening.

Derivatives Insights:

Short Hedging:

Although we don't see any trouble in this pair, some more uncertain upside gains packed around this currency cross. For those who reckon the downswings on this pair, the short futures positions are advisable.

It is an unlimited profit, unlimited risk position that can be entered by the futures speculator to profit from a fall in the price of the underlying.

The short futures position is also used by a producer to lock in a price of a commodity that he is going to sell in the future.

Unlimited Profit Potential: The threshold limits are not fixed for maximum profit from short futures position. The futures trader stands to profit as long as the underlying currency price goes down.

Unlimited Risk: Huge losses can also be expected from this position if the underlying currency price rises radically.