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FxWirePro: Bulls remain in charge of pound despite Brexit and political woes

Earlier this month, reports came out that as many as 40 members of the Conservative Party are looking to oust Prime Minister Theresa May. A previous plot to acquire signatures of as many as 30 members of the parliament in September finally foiled. However, this kind of attack on Prime Minister whose snap election bet failed miserably and whose party is governing as a minority government, doesn’t speak very well of the UK’s domestic politics. In addition to that, the European counterparts such as chief Brexit negotiator Michel Barnier have repeatedly said that enough progress has not been made yet to move the talks to the next phase, which would include future trade relations and the time is running out. Now, add weakening housing market to the mix.

Despite all the above misery, the pound has so far withstood against any bearish pressure and the latest price action suggests that the bulls remain well in charge of the pair. The chart shows that the pair has remained range bound since October. However, it is also important to note the bears have failed thrice since to break it below 1.305 area decisively. Instead, this week, the bulls have broken above the range high.

Higher inflation, a weaker dollar, and rate hike bets are the key factors providing support to the pound. However, we at FxWirePro remain bearish on the pound over a longer horizon and would prefer to enter short positions around 1.35-1.38 area. The pound is currently trading at 1.331 against the dollar.

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