Pound is the worst performing major today as investors this week sharply sold off currency to hedge against Brexit, an event if British voters votes to be out of European Union. We have kept suggesting Pound may move higher in the near term due to –
- Uncertainty surrounding Brexit. No poll is not being able to predict how Britons might vote in the final as large 15-20% remain undecided. So it is equal risk shorting the Pound.
- Moreover we have been expecting weakness in Dollar as current FED cycle fail to justify the strength so Pound is likely to ride weaker Dollar.
After being battered this week, Pound is up sharply almost 300 pips since FOMC policy announcement yesterday.
We expect Pound to resume its gain after Bank of England (BOE) policy announcement, which is scheduled for 12:00 GMT.
Not because one of the nine members will be voting to hike now, which is unlikely given Britain’s referendum ahead on June 23rd.
It is more to do with how much dovish can you be. Bank of England’s (BOE) dovish rhetoric is largely priced in and Pound wouldn’t be at such lower levels given the recovery in global risk sentiment if not for Brexit fear.
So, in the short term until the referendum, upside is more lucrative for GBP/USD.
And for BOE, they are likely to remain calm and maintain their stance.
Pound is currently trading at 1.435 against Dollar.
