GBP/USD Daily Fundamental Forecast – February 1, 2018

The pound also rose higher during the course of the day yesterday as the dollar spent much of the day on the backfoot. We had mentioned in our forecast yesterday that the moves in the market are likely to be dominated by the month end flows and positioning and we believe that what we saw in the pound as well.

GBPUSD Still Strong

The GBPUSD pair made a brief trip above the 1.42 region before correcting lower and it trades below this region as of this writing. There was not much fundamental or economic news around yesterday and that is one of the reasons for the dollar to lose ground, after gaining a bit of its strength towards the middle of last week. We expect the dollar to be the focus in the weeks ahead as the Fed looks at a slew of important decisions.

The Fed is going to have a new Fed Chief in Powell who would be taking over from Yellen this month and the market would be looking forward to see what kind of a Chief he would be. Also, the market would be watching the incoming data from the US very closely as the decision for further rate hikes from the Fed would be very much dependent on the incoming data. The market expects 3 or more rate hikes from the Fed this year and the incoming data is likely to determine that.

Hence the dollar is likely to be the focus for this month though the pound is also susceptible to any major developments in the Brexit process. It had received a boost during the past month due to anticipation of a softer Brexit but it remains to be seen whether any deal would be announced during this month. For the rest of the day, we have the PMI data from both the US and the UK but irrespective of the data, we should see the pair continue to consolidate on either side of the 1.42 region as the market awaits the NFP tomorrow.