Forex Monthly Outlook – November 2017

The GBPUSD pair had a pretty volatile month in October though the range was pretty small. The pair made a move down, then up and down and finally ended the month nears the highs of its monthly range in anticipation of  better data leading to a hike from the BOE. Overall, it was a very volatile month for the pound. The pound was not helped much by the incoming data as the data continued to remain choppy for most of the time. The BOE would have wished that they got to see some better data from the UK which would have helped to make their decision easier but that was not to be.

GBPUSD Likely to be Buoyed by BOE

It was also another month of Brexit negotiations where there was little progress and this also weighed on the pound. The lack of progress was of so much concern that the UK PM May had to personally travel to Brussels to lead the latest round of negotiations in an attempt to push it ahead. There were reports of the UK walking out of the negotiations with no deal but this would not be a good option for either the UK or the Eurozone and the leaders from both sides understand that and that is why we have been seeing them try their best to push through some progress in the talks. Looking ahead to the new month of November, the market expects the BOE to hike rates in the first week of the new month. The BOE has been hawkish in its minutes over the last couple of months but the data is still choppy which doesnt necessarily support a rate hike at this point of time. But the BOE needs to show some intent and it also needs to make sure that it does its bit in pushing the economy ahead and that is why we are likely to see a rate hike. This should be very bullish for the pound during the month of November which should see it move through 1.35 and beyond.

USDJPY Caught in Tight Range

The USDJPY pair had a tight period of consolidation and ranging for most of the month as the pair was unable to break through the range. The dollar was holding steady for most of this period without threatening to make any kind of a breakout just yet. The data from the US continues to be steady and sometimes choppy and this led to some pressure on the dollar and hence it was not able to make the expected breakout. On the other hand, the yen was subdued as it was the month of elections in Japan. The current PM Abe won another term in the elections comfortably and this was a bit of a boost for the yen and the stock markets in Japan as it would guarantee continuation of the existing policy. A combination of these events helped to keep the pair under check.

In the upcoming month of November, we can expect to see some break through the 115 region for this pair as the dollar is expected to gain in strength. The market expects the Fed to hike rates in December and that has been partially priced into the markets. But that would depend a large deal on the incoming data from the US in November and hence we believe that the first week of the month, with its slew of data, would more or less determine whether there would be a rate hike in December. If this is confirmed, then we should see some good strength in the dollar which would then push the USDJPY pair towards 118.

AUDUSD Under Pressure from Gold

The AUDUSD pair had a difficult month which was quite similar to the price action in most of the currencies that are highly dependent on commodity prices. The dollar did not have much say in the price action as it held steady during the course of the month but it was the prices of gold that seemed to have a large hold on the price action in the Aussie. The gold prices were mostly weak during the course of the month of October as the demand was less for the commodity and it was also under pressure due to the fact that the rates were being raised around the world and the stock markets were on a bull run which led to the shifting of funds out of the gold markets.

Looking ahead to the month of November, we expect the pair to continue to be weak. The pair is likely to be under further pressure during the upcoming month as the incoming data from the US is likely to more or less confirm the rate hike from the Fed in December and once that is confirmed, the dollar is likely to rise. So, a combination of a strong dollar and weak gold prices is likely to place the Aussie under a lot of pressure in the coming month which should then make the AUDUSD pair challenge the 0.75 region and below.