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Pound’s downside risk is great

Pound’s downside risk is great

EUR/GBPhas climbed around 3.5% from its lows in early May as the markets adjust due to investor’s expectations of potential outcomes related to Brexit.

GBP is still the second top performing G10 currency after the Canadian Dollar regardless of its recent losses. Market is expecting a possible consensus to a Brexit deal to be the most favourable outcome that brings in optimism to the pound during the early months of this year. British pound now seems to be more vulnerable in view of the ongoing political uncertainty, but there is the possibility of a test of the longer term SMA at 0.8795 in the next few days.

Analysts argue that the chances of another referendum are still low, as this should aid additional support to GBP. The downside for risk for pound is currently an issue as speculators tend to have been shorting GBP positions throughout the year.

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