In Godfrey's view, at the current stage.
The bearish analysis reports on the GBP exchange rate issued by institutions such as Citibank, Blackstone Group, and BNY Mellon, as well as the short-selling logic put forward by institutions like Huayi Capital, Aberdeen Asset, and Huayin International, all lack actual data support and are extremely one-sided.
Regardless of the perspective of the UK's national interests or the actual practices of the Bank of England.
There can be no surprises regarding the outcome of the UK's Brexit referendum and the continuous appreciation trend of the GBP exchange rate.
What's more, the GBP exchange rate at this time has already hit its lowest point in the past fifteen years, slightly below its performance during the 2008 financial crisis.
At such a low level, coupled with the market's clear bullish expectations.
He found it hard to understand the short sellers' actions at this position and was extremely firm in his belief that short sellers could not sustainably suppress the GBP exchange rate, let alone trigger extreme short squeezes, leading to long positions in the market being trampled and forced to cover.
Therefore, after analysis from various aspects and verification of the underlying logic.
He became even more determined to continue increasing long orders and firmly go long on the GBP exchange rate, instructing the traders in the trading room to further increase their long positions in the GBP exchange rate.
And almost simultaneously.
As staunch bullish forces in the market.
Nomura Bank of Tokyo Investment Department, Hong Kong Hashimoto Asset Investment Department, Hong Kong Navigator Capital Investment Department...
In the trading rooms of the major fund institutions, a group of traders also continued to heavily increase their long positions when the GBP exchange rate fluctuated and fell back to its intraday low.
However, the increased holdings by these major bullish institutions in the Asia-Pacific region.
Did not easily reverse the short-term trend of the GBP exchange rate.
At this time, in the entire GBP exchange rate market, the shift from long to short by major institutions such as Citibank, BNY Mellon, and Blackstone Group, along with the bearish market analysis reports released by various short-selling institutions, and the continuous bearish information released to the market by major short-selling institutions like Huayi Capital, Huayin International, and Aberdeen Asset, continued to deeply influence market sentiment for both bulls and bears.
It was still causing numerous retail long position holders and speculative funds in the market to waver in confidence and cover their positions.
At the same time, it was also attracting more other funds to follow suit and enter the market to short.
Against this market backdrop, with bearish forces and sentiment temporarily dominating.
At 10:00 AM, the GBP exchange rate, with sustained volume amplification, broke through the 1.5300 resistance level, instantly falling to yesterday's low of 1.5270.
At 11:45 AM, the GBP exchange rate continued its downward trend, refreshing its recent low to 1.5250.
At 2:30 PM, the GBP exchange rate touched an intraday low of 1.5239.
However, the continuous downward trend of the GBP exchange rate during the Asian trading session, once market trading hours re-entered the more intense European trading session, began to rebound.
After the brief defeat of the bulls during the Asian session.
They launched a fierce counterattack during the European trading session.
"After major global market makers and exchanges significantly raised the margin ratios for standard GBP exchange rate contract trading, it seems they haven't curbed global capital's trading enthusiasm and speculative fervor in the GBP exchange rate market."
At 5:00 PM Yanjing time, which was the start of the European trading session, in London, Claude, the fund manager of Barclays Bank's 'Lion International' Hedge Fund Trading Department, remarked as he gazed at the GBP exchange rate chart,
"The long and short positions in the market are still increasing, but the net long positions are starting to decrease, which is somewhat surprising."
"It's not just the speculative fervor in the GBP exchange rate market that's sharply rising,"
Alex, head of the market research department in the fund trading department, responded.
"At the current stage, the long and short positions in the Euro, US Dollar Index, spot gold market... are all rapidly increasing, and their market's speculative nature is also soaring."
Claude nodded slightly, smiling,
"It's understandable. The nationwide referendum next week on June 23rd will have a profound impact on the global economy and global financial markets. For such a historical event, it would be strange if the speculative enthusiasm in the financial market didn't rise. Moreover, it's foreseeable... as June 23rd draws nearer, the intensity of market trading is expected to further escalate."
Alex said,
"The long and short positions in the GBP exchange rate market have both surpassed 2 million lots. It's truly a historic moment."
Claude said,
"Risk and profit are intertwined. Such enormous long and short positions in the market will inevitably lead to extreme market volatility. On June 23rd, it's estimated that many people in the financial market will be margin called, and similarly, many will make huge profits."
Alex nodded,
"Indeed. Mr. Claude, are you still maintaining a cautious attitude towards the referendum result on the 23rd and the direction of the GBP exchange rate market?
I heard that according to preliminary estimates by government agencies, the probability of the referendum outcome leaning towards continued EU membership is over 90%. In London city alone, about 70% of people should favor the country remaining within the EU system.
In my opinion... The reason the Cabinet approved this referendum proposal and put forward the resolution for a national referendum on Brexit.
Is not truly for the country to leave the EU, but rather to negotiate terms with our country's other major neighbors within the EU system, to alleviate some of the financial support amounts and pressures we've faced in previous years."
Claude said,
"I also believe that the Cabinet's true intention in passing this referendum proposal is to negotiate terms with EU countries. But once this process is initiated, until the final result is out, no one can firmly believe that there won't be any surprises.
I'm now worried that these government officials might accidentally misplay this. You know, our country's population isn't just limited to those in London. According to current news, people in the Scotland region seem to have a very strong desire for Brexit."
Alex said,
"It shouldn't go wrong, right? This is a proposal led by the Prime Minister; any unexpected situations should be within anticipation."
Claude smiled and said,
"Hard to say. Any 'black swan' event, before it happens, always seems impossible. However... regardless of the referendum outcome, our institution's long positions in the GBP exchange rate market cannot be held any longer."
"Mr. Claude, you're going to completely liquidate 'Lion International's' long positions?"
Alex asked, utterly surprised.
He remembered that about half a month ago, Claude was still firmly bullish on the GBP exchange rate, believing that the national economy had reached a critical moment for expected improvement.
He also believed that the central bank's aggressive monetary policy would provide a significant boost to the exchange rate market.
But he never expected...
That Claude, in a market where most European capital was bullish on the GBP exchange rate, believing the June 23rd national referendum was merely a play orchestrated by government cabinet members to secure more internal EU benefits, would choose to liquidate the long positions held by the main hedge fund products.
Claude replied,
"Several years ago, when I was traveling in Huaguo, I heard a saying: 'A gentleman does not stand under a crumbling wall.'
Now, in my opinion... In the GBP exchange rate market, with such immense long and short positions, and such soaring speculative sentiment. That is a crumbling wall.
The current GBP exchange rate market is like a huge powder keg, and the referendum result next week on the 23rd is the fuse that will ignite this massive powder keg. In fact, it might not even be the referendum result.
As long as market expectations drastically shift instantly, or if the expected outcome of the referendum suddenly evolves towards favoring Brexit. Then, extreme market volatility will inevitably occur in the GBP exchange rate market.
Although, judging from various news and sentiment feedback in the current market, the expectation and prediction of the referendum result, leaning towards remaining in the EU, have a probability as high as 90%.
But what if the outcome is unexpected? Then it's highly possible that our institution's current enormous long positions won't even have time to set a stop-loss or cover, and will be liquidated by the short sellers.
This kind of highly speculative market volatility is suitable for gamblers, not investors. Holding a large number of long positions and staying in the market might yield huge profits, but it could also mean losing all principal.
In the foreign exchange market, there is never a shortage of gamblers and speculators, but I am not such a gambler or speculator, so... I choose not to gamble anymore."
Previously, the volume of long and short positions in the GBP exchange rate market was not so exaggerated.
Moreover, the market's expected direction at that time was completely different from now.
He had originally planned to hold a large number of long positions in the fund products until June 23rd, and then re-evaluate after the referendum results were out.
But now...
Facing the continuous surge in long and short positions in the market.
Facing the sustained rise in market speculative sentiment.
He knew that if he made a wrong judgment, he might not even be able to place a stop-loss, and thus was unwilling to continue gambling.
Furthermore, years of investment experience in the financial market, as well as last year's 'Swiss Franc Black Swan' event, left him with some apprehension, making him unwilling to gamble on such high-risk situations.
Of course, the collective shift from long to short by a group of US-funded institutions such as Citibank, BNY Mellon, Blackstone Group, and Aberdeen Asset, also raised some red flags for him, as their bearish reports, while perhaps not perfectly logical, were not entirely without reference value.
Thinking this, Claude didn't wait for Alex's response.
He immediately turned around and issued trading instructions to the traders in the room to cover stop-loss and liquidate long positions.
As the traders continuously executed the trading instructions.
Due to the large-scale covering and liquidation of the major long-position capital of 'Lion International' in the market, the GBP exchange rate, which had been continuously rising and forming a rebound trend, was suppressed again, causing the 1.5300 level to be lost and regained, then regained and lost again, never able to firmly hold.
"Why is the pressure at the 1.5300 level getting heavier and heavier?"
At 6:00 PM Yanjing time, during the European trading session, in London's UBS International Investment Department, 'Andrea' Hedge Fund Trading Room, fund manager Andrea's brow furrowed instantly as she noticed the GBP exchange rate violently oscillating back and forth around 1.5300, unable to hold firm.
"Short positions in the market are rapidly increasing today, while net long positions are sharply decreasing,"
Enid, the market analysis head of 'Andrea' Hedge Fund, responded.
"This indicates that bearish forces in the market are growing, while bullish forces are covering positions. With this increase and decrease, the upward pressure on the GBP exchange rate naturally intensifies."
Andrea said,
"It seems the bearish reports released by a group of US-funded institutions to the market last night are still having a significant impact. If the 1.5300 level cannot be strongly breached, the impact on the confidence of the bulls in the market will likely be quite negative.
Furthermore, as the US trading session begins and the positions of various bearish US-funded institutions increase, the trend of the GBP exchange rate may become even less optimistic.
Alas... In the preceding days, when market expectations were entirely skewed towards the bulls, we really should have been more aggressive and pushed the exchange rate directly above 1.5500."
Enid said,
"Currently, the prevailing sentiment in the GBP exchange rate market is still leaning towards a bullish direction.
Moreover, according to our information, 'Huifeng Bank' and the Bank of England should still be increasing their long positions in the GBP exchange rate and conducting corresponding market operations."
"Besides market news, are there any other positive driving factors?"
Andrea asked.
Enid thought for a moment, but before she could answer, the trading room door was pushed open.
Evangeline, the investment department's core market intelligence officer, walked in and hastily reported,
"According to the latest information we've received, the Prime Minister will privately meet with French and German political figures this weekend to further discuss the issue of remaining in or leaving the EU. The President of the European Commission will also be present."
"This is big news,"
Enid said.
"It seems... many of the market's worries and the deliberate exaggerations by short sellers are all for self-preservation,"
Andrea's eyes instantly sharpened upon hearing the news.
She quickly turned to the traders and instructed,
"Go long, immediately increase long positions, push the GBP exchange rate up. The positive expectations brought by this news will surely quickly take root in the market. By increasing long positions now, we can quickly harvest some profits. At the same time..."
She paused, then quickly turned her head to Enid and said,
"There's been a huge shift in the news, so we need to keep up with dominating market sentiment. Let's use our institution's influence to issue bullish reports to the market, attracting more follow-on long funds. With the influence of these factors, today we might be able to directly push the major short-selling forces in the market to the brink.
Then, with the buildup of sentiment and news fermentation over the next two weekend days. Perhaps, even before the June 23rd referendum, the major short-selling forces in the market will panic and trigger a continuous extreme short squeeze."
"Alright,"
Enid quickly responded, then left the trading room.
Then, under Andrea's command, and with the continuous increase in long positions by the entire 'UBS Andrea' Hedge Fund...
Almost instantaneously.
The GBP exchange rate soared linearly, forcefully breaking through the 1.5300 level again, surging over 50 pips within 5 minutes, returning to its intraday high.
(End of Chapter)