FxWirePro: Sterling Likely to Drop Below Parity Against Dollar

FxWirePro: Sterling Likely to Drop Below Parity Against Dollar

30 June 2016, 10:39
Roberto Jacobs

FxWirePro: Sterling Likely to Drop Below Parity Against Dollar

You might be thinking, looking at the call, “What the hell?” or “This is too far”. We know, even Billionaire investor and legendary George Soros isn’t calling for such a number.

Despite your astonishment, we strongly feel the parity test can be quite real and the pound has a lot more to decline but that will depend a lot on the political scenarios. Think of a situation, where Brexit actually happens and the United Kingdom gets a deal which failed to be accepted by the Scotland and it goes for independence, followed by Northern Ireland and Gibraltar. It doesn’t end there than financial services industry in such a case may find refuge in Glasgow, away from London.

As of now, there is so much uncertainty that ‘n’ number of scenarios are possible including the above one. As time goes by we are likely to have more clarity.

One of our model, which successfully predicted the decline of the dollar, the rise of the euro, and the rise of Yen provided the above call, so we are quite confident that this might get reached too. However, such a large call may require a much longer time to reach, probably more than a year, especially given the current uncertainty.

We also expect strong performance from the dollar over the next one year.

Trade idea:

We expect sterling to recover and try to test $1.4 per dollar area, so it is advised to sell at the current level and at rallies targeting parity at least and few hundred pips more with a stop loss around 1.5 area. The pound is currently trading at 1.346 against the dollar.

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