GBP/USD Daily Fundamental Forecast – February 28, 2018

The GBPUSD pair moved lower on the back of dollar strength that was seen all across the board over the last 24 hours. It remains to be seen whether the dollar strength would be enough for the pair to break through the strong support region at around 1.38 and if that happens, then we should see the pair begin to slip towards the 1.35 region.

GBPUSD Slides Lower

The dollar gained in strength yesterday after the debut of the new Fed Chief Powell at Capitol Hill. He has taken over the mantle from the outgoing Chief Yellen and the market was eager to hear his thoughts on the monetary policy and the economy as well. Many of the Fed members had expressed a keen interest in the Fed hiking rates in the days going forward and the market wanted to know whether Powell also felt the same. To his credit, he stuck to the script and said that he was happy with the way the monetary policy was developing and how it had to keep pace with the economy as well.

He also expressed confidence that there was no risk of an economic slowdown and that the incoming data proved that the US economy was doing very well. This was as hawkish as he could get and this caused the buying of the dollars which led the pair to slide down through the 1.39 region and it continues to trade in that region as of this writing. Today is the last day of the month and hence we believe that there would be a lot of month end currency flows and trade positioning which could rock the pair.

Looking ahead to the rest of the day, we do not have any major news from the UK but we have the advance GDP data from the US which, if it comes out strong, should strengthen the dollar even further. The pound bulls have shown some good resilience so far but their resoluteness could be tested in the coming days as the dollar begins to gain strength in a slow and steady manner in the medium term.