After that, when the trading session moved into the Asian session on June 22nd, the pound exchange rate rebounded again, gradually recovering its losses.
"The intraday volatility of the pound exchange rate is truly getting bigger and bigger!"
On June 22nd, during the Asian trading session, 9 AM Yan Jing time, in Hong Kong, at Huayi Capital's Hong Kong branch, in the Huayi Chengyuan No. 1 Main Hedge Fund Trading Room, Fund Trading Manager Qu Zecai said: "The long-short open interest positions in the market have all already exceeded the massive volume of 4.5 million lots."
"Tomorrow is the time for the national referendum." Su Yi replied, "The closer it gets to the referendum, the greater the market volatility will surely become."
"It's not just that market fluctuations will become increasingly intense." Kong Fansheng of Huayin International Investment Department One, which operates in conjunction with Huayi Capital, also said at this time, "Market news, sentiment, and expectation changes are also in a situation of drastic change."
"Overall, the news side still favors the long side more." Meng Shengfei of Huayin International Investment Department Two took over and said, "However, the main capital institutions in the market that are flipping from long to short also seem to be increasing. Following Goldman Sachs Group's flip from long to short, Barclays Investment Bank's flip from long to short last night also caused a significant impact on the market."
"Barclays Investment Bank's flip from long to short was also somewhat unexpected!" In the Aberdeen Asset Evolution No. 1 Main Hedge Fund Product Trading Room, Frederick also replied at this time via instant communication, "This indicates that among British domestic capital, quite a few capital institutions are also bearish and shorting.
And Barclays Investment Bank's flip from long to short.
This will have a certain strategic impact on the entire group of long European capital and British domestic capital institutions, and will also lead many speculative retail investors following the long trend in the market to make corresponding strategic shifts.
This can be seen from the latter half of yesterday's trading session, where the net long positions in the market have been continuously decreasing.
Many intraday long positions in the market have been continuously closing out positions and covering, which can be seen from this."
"Now, the number of net long positions has returned to within 700,000 lots." Meng Shengfei said, "Originally, I was worried that the market news continuously shifting towards the long direction would directly lead to a rapid imbalance in the long-short forces in the market. Now it seems... I might have been overly concerned."
Su Yi smiled and said, "The pound exchange rate trend was originally in a long-term downward channel, and the short forces in the market have never been weak. It was only when the British cabinet suddenly passed the 'national referendum on Brexit' proposal that it caused a short-term shift in market expectations."
"Wasn't this long-short battle initiated by you, Mr. Su?" Meng Shengfei said with a smile.
Su Yi replied, "I was just going with the flow."
"However, I heard that the Bank of England has increased its intervention in the pound foreign exchange market." Kong Fansheng pondered for a moment and said, "I also heard that several core financial institutions in the UK have responded to the central bank's call and are continuously injecting funds to intervene in the market exchange rate of the pound."
"This is no longer hearsay; it's a fact." Frederick replied, "According to the latest market news, the Bank of England and its associated financial institutions yesterday added at least 400,000 lots of long positions in the pound exchange rate market. However... judging from the market trend, this massive long intervention force was unable to stop the pound's pullback trend, nor was it able to salvage the market's decline."
"So, the market rumor, the plan to 'snipe Wall Street short capital', is true?" Meng Shengfei asked in surprise.
Frederick replied, "You could say that."
"Then, if the Bank of England and its associated institutions personally step in, will it lead to the British government directly controlling the outcome of tomorrow's national referendum?" Meng Shengfei, hearing Frederick confirm the authenticity of the 'snipe Wall Street short capital' plan, suddenly spoke with a hint of conspiracy theory, "If the direct intervention of central bank institutions could lead to the government manipulating the referendum results... then on this current gambling table of the pound exchange rate, we are gambling big with a group of guys who already hold winning hands. It's hard to say what our chances of winning are."
To be honest, when he decided to intervene in this long-short battle in the pound exchange rate market.
He had not thought that the subsequent trend development and the number of long-short positions would be so intense.
A long-short position volume as high as 4.5 million lots, this was also the first time he had seen in his personal investment career.
What's more... the direct intervention and involvement of the Bank of England also added a lot of worries to his mind as the investment principal of a short institution.
After all, for a country's currency exchange rate.
As the central bank institution that issues currency, as long as foreign exchange reserves are relatively sufficient, and as long as it is determined to maintain exchange rate stability and intervene in the market, it can still play a decisive role in exchange rate trend changes.
Since the plan to 'snipe Wall Street short capital' is very likely true.
And the Bank of England and its associated financial institutions are indeed massively going long on the pound exchange rate, to resist Wall Street short capital, and even the shorting behavior of main short institutions like Huayin International, Huayi Capital, Aberdeen Asset... then he felt that his worries are entirely possible to materialize.
Su Yi, hearing Meng Shengfei's concerns, replied calmly, "As the issuing institution of the pound, the Bank of England certainly wants to maintain the pound exchange rate trend and keep it stable, but as it stands, the US dollar foreign exchange reserves available for sale in the hands of the Bank of England are not sufficient.
If it cannot massively sell off US dollar foreign exchange, recall the pound currency circulating in the market, and perform actual market operations.
Relying solely on the suppression of long positions in the exchange rate trading market and the spontaneous long-seeking behavior of associated financial institutions.
It is fundamentally unable to curb the trend development of the pound exchange rate.
With the massive uncertain event of tomorrow's 'national referendum on Brexit' before them.
For the offline trading market, many international trade companies, many currency exchange companies, international currency trading companies, regardless of the final referendum result, regardless of the pound exchange rate trend, or which direction of extreme market changes will occur tomorrow, in order to avoid the risk of uncertainty.
They will prioritize selling off pounds and convert them into US dollars, which have a relatively stable exchange rate and stronger liquidity.
Therefore...
Although currently, the news side leans towards the long direction.
But in the actual offline trading market, the free-flowing currency trade market, the pound exchange rate is already steadily declining, and the pounds circulating in the market are also rapidly increasing.
If it weren't for the Bank of England continuously intervening in the pound exchange rate.
If it weren't for tomorrow's referendum result, where preliminary counts indicate staying in the EU.
The actual pound exchange rate at this time should have long since fallen below the low point a month ago, when the national referendum proposal was approved by the cabinet, which was the 1.4600 level."
"Mr. Su makes a good point." Frederick smiled and continued, "According to our institution's intelligence, major international currency trading institutions currently, in their pound-to-dollar exchange business, have already started implementing corresponding restrictions, and even with these restrictions already in place. The number of customers converting their pounds into US dollars is still rapidly increasing.
Moreover, in the offline black market, the group of investors selling off pounds will be even larger. Overall, the Bank of England's intervention in the pound exchange rate has not curbed the offline trading market and everyone's selling spree of the pound.
Just as Mr. Su said...Currently, the offline black market trading market and the online trading market have corresponding exchange rate differences in terms of pound exchange rate trends. If the Bank of England truly wants to curb this situation where everyone is scrambling to sell off pounds to avoid the uncertain risks of tomorrow's referendum.
I estimate it would need to sell off at least tens of billions of US dollars in foreign exchange reserves. But as we all know, the Bank of England would never at this time sell off such a massive amount of US dollar foreign exchange reserves to stabilize the pound exchange rate.
Because the biggest risk affecting the pound exchange rate has not yet arrived. They must retain sufficient foreign exchange reserves to cope with tomorrow's extreme market movements."
"No wonder whether it's Wall Street capital institutions or other major investment banks globally, more and more are turning from long to short." Kong Fansheng realized at this moment, "However, the hidden danger that Manager Meng just mentioned still exists: if government institutions, pressured by the market's fear of a pound exchange rate collapse, in order to preserve the exchange rate, manipulate the referendum results, and in conjunction with the Bank of England, implement the plan to 'snipe short capital', leveraging the market sentiment guided by the referendum results and their capital advantage, to instantly push up the pound exchange rate and wipe out the main short players in the market, it is entirely possible!"
"As the UK national referendum has developed to this point, do government institutions still have room for manipulation?" Su Yi smiled and replied, "If the British government internally, meaning both Houses and the Cabinet, were a monolith, then what you two, Manager Kong and Manager Meng, are worried about might indeed happen.
However, if its internal structure were truly a monolith, and opinions were unanimous. A month ago, the proposal for 'national referendum on Brexit' would not have been put forward, deliberated upon, and passed. This proposal could be put forward, deliberated upon, and passed. This indicates that within the British government, the divisions regarding Brexit or not were already significant.
Now that the proposal has passed and the national referendum procedure has been initiated, then the development of events is no longer controllable by government institutions themselves.
In such a situation of global attention, with massive participation from countless capital institutions worldwide, and watching. Whether it's local city governments or the British cabinet, they have no way, and at the same time dare not manipulate the voting results or conduct fake votes.
Because if fraud is discovered. This would trigger greater domestic conflicts in the UK and lead to more and more serious problems. And if the voting results were manipulated, the public would not accept it, many officials in the cabinet who want to leave the EU would not accept it, then there would certainly be another referendum. So doing this is completely meaningless.
Also, once fraud occurs, it would create a fatal blow opportunity for one's political opponents and ruin one's political future. For many in the British Cabinet, this is completely not worth it. For them, political future far outweighs the determination to save the exchange rate. What's more, market-based exchange rates, after falling, are not unable to rise back, but their political future, once ruined, there is no future."
"So... the conspiracy theory doesn't exist?" Meng Shengfei asked.
Su Yi replied firmly, "At least in the face of this fundamental matter of global attention, with massive participation from countless capital institutions worldwide, concerning the nation's destiny and future, the conspiracy theory you mentioned does not exist."
"Then I'm relieved." Meng Shengfei breathed a sigh of relief and said with a smile, "Solely relying on market forces, entirely on the combined efforts of countless funds inside and outside the market, with the Bank of England being constrained, I believe the trend of the pound exchange rate absolutely cannot continue to break upwards."
"Currently, the main long institutions in the market seem to still hold the advantage, but in reality, they are just an instant away from a confidence collapse." Su Yi said, "It's just that after more than a month of continuous long-short struggle, the long positions in the market have accumulated too massively. Even if some main long institutions at this point have realized the issue of position risk, it's very difficult for them to withdraw."
"That's true." Kong Fansheng nodded slightly, "The excessive accumulation of massive long positions, once a very large long institution with massive holdings concentrates on covering its positions, a chain reaction in the market will quickly ensue, leading to a 'domino effect' collapse in the long direction."
"So... they can only pin their hopes on the Bank of England." Frederick said with a smile, "But this lifeline cannot help them at all."
"Currently, all the main short institutions in the market should be waiting for the moment when a certain main long institution's confidence collapses and it concentrates on covering its positions, right?" Meng Shengfei said, "Once such an opportunity arises, a group of main short institutions will absolutely desperately concentrate funds to drive down prices."
"This is actually the same for us." Su Yi said, "Under the accumulation of excessively massive long-short positions, at this time, both long and short sides in the market can only hold on stubbornly. Without smashing the other side, no one can leave the market safely."
"But victory will ultimately belong to us." Frederick said with full confidence.
The trend of the pound exchange rate, in his view, the current trend is very clear.
Even if tomorrow's referendum results are different from expectations, he believes they can still achieve ultimate victory and seize huge profits from this round of extreme pound market volatility.
And with the analysis and discussion of several people...
In the pound exchange rate market, after a brief rebound in the pound exchange rate trend, it surprisingly began to fall again.
Its rebound strength appeared even weaker than yesterday, and the rate of new short positions on the market also began to surpass long positions, causing net long positions in the market to continuously plummet.
(End of chapter)