Some of the UK newspaper headlines are quite alarmist but the Mansion House speech from Mervyn King has not been greeted by the widespread GBP selling which one might expect. It might still happen once London opens, but dealers report that the big Middle East Sovereigns were buying dips in cable overnight and there are solid EUR/GBP offers very close to present levels.
Maybe its a case of nobody wanting to get involved before the event-risk weekend, but if the market were seriously long of GBP then we would already have seen a reaction, so I think it’s a good indication of market positioning, if nothing else.
