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Pound Drops on Brexit Headlines, USD Charged for Fed Speculation

Pound Drops on Brexit Headlines, USD Charged for Fed Speculation

John Kicklighter, Chief Strategist

Talking Points:

• The Pound gapped lower to start the week after the polls suggested a strong push in the 'Brexit' polls

• Risk trends opened strong to start the week across equities, carry and emerging markets - but still a tacticians market

• Dollar staged to extend last week's rate forecast revival should upcoming data feed the hawks' and bulls' case

See the DailyFX Analysts' 1Q forecasts for the Dollar, Euro, Pound, Equities and Gold as well as our favorite 2016 trading opportunities in the DailyFX Trading Guides page.

The FX market opened to considerable volatility this week. Sterling was at the top of the market movers chart with the weekend 'Brexit' headlines taking an unexpectedly sharp turn. What seemed to be encouraging headway with UK Prime Minister finding acceptable ground with his EU counterparts to campaign his country to stay within the large European economy through Friday's close turned into skepticism in success with London's mayor backing the call to leave. While we are not likely to see many moves of this magnitude going forward until we close in on the June 23 vote, expect volatility and a focus on polls. Meanwhile, risk trends saw a robust bounce with equities, some Yen crosses and commodities jumping higher. However, the drive in the move comes into question when we consider the fundamentals. This is still the speculators's market versus the investor - tactician versus value-minded market participant. Meanwhile, event risk ahead looks to capitalize on last week's Dollar strength through CPI's update. Will the next Greenback lever still be bullish? We look at this and more in today's Trading Video.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.