GBP/USD flows: Manchesterism; max GBP spec shorts at risk of buy the fact?

UK PM-elect Burnham has just been giving a speech which, as previewed, has a heavy emphasis on devolved power (what he calls Manchester-ism) – though run from the PM office in Manchester.   

Probably politically astute (‘growth in all postcodes’) but how that translates into fiscal control and local tax control is an open question. Public housing also given a strong emphasis which fits with a view that public investment is being eyed. He does make a nod to again backing fiscal discipline and ‘current fiscal rules’, sensitive to that trigger issue. Over coming months, it will be a question of how receptive the market proves to an investment driven agenda., in particular what approach is taken to financing this regionally.

For sterling, perhaps the bigger current issue is actually the extent of recent spec shorts – a new extreme going back over the last decade in fact on the last print. Looking at extreme in the same ballpark, in the following 8-weeks, GBP/USD has seen a mild squeeze in Aug-2019 (circa 3%), a bigger short squeeze in Mar-2017 (4%+), though back in Aug-2106 it did see a sharp continuation move, although that has to be seen in isolation in the context of Brexit. Overall then, there clearly is the risk of ‘buy the fact’ squeeze of some kind on extreme GBP positioning, though that isn't guaranteed.