FxWirePro: Pound recovers on May-Juncker talks; retail sentiment points to further downside

The pound has recovered after dropping to as low as 1.285 against the USD, as the UK Prime Minister Theresa May had constructive talks and promises of cooperation from the European Commission chief Jean Claude Juncker earlier this week, and sterling is currently trading at 1.294 against the USD. But will the recovery sustain?

• Despite the recovery, the pound has been struggling to break to 1.3 area against the USD.

The retail sentiment is against a further rally in the pound,

• The sentiment reports from IG Markets, which is a UK-based company providing trading in financial derivatives such as contracts for difference and financial spread betting, strongly suggest that pound could slide further against the USD.
• IG markets’ retail positions data provide a glimpse to retail traders’ positions, which are largely used as a contrarian indicator since retail positioning moves in the opposite direction to market movements.

• The position data suggests 59 percent of retail positions are on the long side, while only 41 percent positions are short, which suggests that further downside is on the cards.