By Yasin Ebrahim
Investing.com – The pound surged to a nearly five-month high against the dollar on Monday, but signs that Brexit negotiations have stalled could prompt bearish bets to rise further against sterling, ING said.
GBP/USD rose 0.66% to $1.2873.
Speculative investors continue to shrug off positive U.K economic surprises, according to ING FX strategist Francesco Pesole. As a result, bearish bets on sterling will remain "relatively high, if not increase" in the next CFTC report after the latest round of Brexit negotiations failed to end the deadlock, Pesole added.
Net short sterling positions, bets on the currency to weaken, climbed in the week to last Tuesday, the latest CFTC data showed.
The U.K and EU wrapped up their latest round of negotiations in London last Thursday but failed to find a solution on key sticking points including access of EU vessels to fish in British waters that have so far stifled progress.
EU chief negotiator Michel Barnier has emphasized that negotiations needed to be completed by October as the process to ratify a potential deal would be lengthy.
The pound's advance on Monday was largely helped by a sharp fall in the dollar as investors bet the Federal Reserve will introduce an average inflation targeting mechanism that would likely keep interest rate lower for longer.
The Federal Open Market Committee is set to kick off its two-day meeting on Tuesday. Policy members are expected to vote to keep rates unchanged within the 0% to 0.25% range.