GBP/USD Fundamental Analysis – week of October 2, 2017

The pair ended the week lower than where it started but there were signs of a rebound in the pair towards the end of the week which should keep the bulls interested. The pound has been one of the strongest currencies around over the last few weeks but even the pound could not withstand the rebound in the strength of the dollar over the last week. The dollar has been receiving some good support from the Fed which has basically said that the door is open for another rate hike in December and the Fed members also seem to be agreeing on the same.

GBPUSD Under Pressure

This has given a shot in the arm for the dollar bulls who bought the currency in large quantities in the first half of last week. This pushed the GBPUSD pair through 1.35 and then 1.34 and at the middle of the week, the pair was looking at the lows near 1.33. It looked as though the bears would gain control but the dollar rebound lost steam in the middle of the week and this helped the pair bounce towards the 1.34 region during the last couple of days.

It remains to be seen how far this rebound can go as the BOE is still quite unsure of whether it wants to hike rates by the end of the year though the market believes that it will. Also, though the UK PM has acted in a deft manner in handling the Brexit process, it is likely to be delayed by a couple of years and this is also likely to weigh on the pound in the short and medium term. With another dollar rebound just around the corner, based on incoming data, the upcoming week is likely to be crucial.

The upcoming week is the first week of a new month with a slew of incoming data from the US including the employment report. If the data comes out better, then we could see another round of dollar buying which could push the GBPUSD lower still and that would set the cat among the pigeons as the dollar would rebound again. Traders would be well advised to wait for the dust to settle before picking the direction.