- The market underestimated this possibility until the last FOMC Meeting Minutes on May 18th. This explains the lack of real sustainable rallies since the one that took place on the 3rd of May.
- The FED has stated that a June hike is still on the table. However, skepticism around a real FED hike prior to the UK referendum has got the pair on hold.
- The latest poll on the BREXIT conducted by IG/SURVATION has show a 44% pro REMAIN against a 38% for the BREXIT supported. The pair gained positive territory after this release which has become the catalyst for this pair during the London Session.
So the question is, where is this pair going?
The GBPUSD is on a towards a re-test of the latest FED hike level. The market has decided to prepare for this scenario of FED hiking rates. However, the idea of hiking rates few days prior a major referendum in the UK, that have direct and significant consequences in the financial markets, seems to be highly unlikely.
Markets are positioning for this event in order to retest the latest FED rate hike levels during the next Federal Funds Rate on June 15th.
On a personal note: I believe the FED will be hiking rates on June the 15th if the data matches the committee expectations. A part from the fact that if they fail to do so with a positive data, markets will loose any remaining trust on the FED regarding a gradual interest rate hiking cycle.