LONDON Investors wary of the impact of Brexit have stacked up record-high bets against the pound, and some in the market warn a traditional April rise in the currency could be a painful spring surprise for anyone who has shorted it.
As this graphic reut.rs/2nE6DI9 shows, for the last 12 years, sterling has consistently risen by an average of 2 percent in the month of April.
Currency analysts at Nomura have called the pound's April a "risk to watch" for investors who have shorted the currency.
"In a perfect market the pattern should not exist but FX is not perfect and there is a pattern of sterling-dollar upside in April," they wrote in a note to clients.
Speculators' net short positions in the pound hit record highs in the week to March 21, before pulling back slightly last week, data from the Commodity Futures Trading Commission shows. [IMM/FX]
Bank of America Merrill Lynch strategist Kamal Sharma cites a combination of the end of the UK tax year and big dividend payouts by UK companies as potential factors in sterling's buoyancy in April.
"Some of the largest UK listed companies tend to be multinationals, so they have non-sterling receivables and therefore the assumption is they repatriate and pay out sterling dividends," he said.
"(but) there's not a huge amount of clarity on what the specific flows are...it (sterling's April bounce) is a function of a lot of other things such as the broader decline in USD through the month."
A Reuters analysis of historical price data for the pound going back to 1985 shows that a consistent trend of April gains for sterling versus the dollar emerges only after 2004.
However, with sterling's 3 percent rise versus a trade-weighted basket since the Bank of England's mid-March meeting and short positions on the pound just off record highs, investors will be doubly wary this month.
(Graphic by Ritvik Carvalho; editing by Mark Heinrich)