Fighting the trend higher in sterling has taken on a Sisyphean dimension inrecent weeks. Technical break-outs, a weak dollar and a more hawkish stancefrom the Bank of England have all contributed. At the same time theingredients for a sell-off, particularly in the housing market, have not catalyzed.Mortgage lending has been hit by macro-prudential measures, seeing demandsideindicators like new buyer inquiries fall, but sellers have compensated bydelaying sales in anticipation of higher prices. This point is illustrated by theRICS sales-to-stock ratio as well as the sanguine approach of the FPC at theirlast meeting. All of this likely makes the target of 1.60 in GBP/USD that we setin the May Blueprint unattainable, so we close out our short at a loss of 1.6%.
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