FxWirePro: Pound might decline towards 1.23 against dollar looking for support

The pound has declined more than 300 pips from its recent peak and we at FxWirePro believes that further decline could take place as it gets hammered by not only political uncertainties but weak economic dockets. Before the UK election outcome, we were positive in the pound for the short-term while our longer-term call for a parity against the dollar was also active. While pound reached two of our targets at 1.29 against the dollar and 1.302 against the dollar, two other targets were not achieved.

Given the current political and economic conditions in the United Kingdom, we suspect that pound would dip further looking for support. Today, the retail sales numbers were published and they were nothing short of a disaster. Official data show monthly sales, excluding fuel, fell 1.6 percent last month after a 2.2 percent climb in April. Sales including fuel dipped 1.2 percent said the Office for National Statistics. On a year on year basis, sales (including fuel) grew 0.9 percent, which is the weakest pace in four years.

On the Brexit front, the European Union leaders are pressuring Britain to get to the negotiating table as early as possible, while the government struggles to form a future path for legislations with the current minority government in place.

While a weaker dollar, despite rate hike from the U.S. Federal Reserve, remains supportive to the pound, these above-mentioned fundamentals are likely to exert their toll on the currency.  These concerns could pull down the pound towards 1.235 from the current rate of 1.27 against the dollar.