FxWirePro: Pound could gain towards 1.5 on weaker Dollar

We expect, Pound to gain further ground in the short term and that to happen against popular expectations of further drop in cable, mainly due to Brexit fear.

So far it is quite evident,

• It is everyone’s guess or hope, whether Britain will stay in European Union or not. So without any significant inclination of the voters, it won’t be until the June vote to get the real picture.

So, after its steady drop from 1.58 area against Dollar to a critical area, lowest since 2008/09 crisis, Pound is poised for a much deeper correction, if Dollar weakens across the board and we expect Dollar to weaken over the next few weeks.

With volatility easing market now expects FED to hike rates by 25 basis points this year, still far from initial expectations of 50 basis points hike this year. We don’t expect FED to hike rates tomorrow and maintain message that hikes would be gradual. So next round of Dollar selling could very well begin tomorrow. Compared to majors, commodity pairs have advanced more on weaker Dollar, so it is likely the majors would play catch in.

Trade idea

• Buy Pound at current price @1.426 with stop loss around 1.38 area and target around $1.51 against Dollar.