GBP/USD Daily Fundamental Forecast – January 24, 2018

The pair has been trading above the 1.40 region for most of the time over the last 24 hours. After facing a bit of selling in the 1.40 region a couple of days back, the pound went lower to pick up more buyers and has since pushed through this region and now trades comfortably above this region as of this writing. The pair has been buoyed by the weakness in the dollar and also the strength of the pound.

Pound Continues to Trade Srongly

A combination like this has proved to be a double whammy as far as this pair is concerned and that is the reason why we have been seeing this pair continue to move higher since the middle of last month with little correction anytime during this period. The dollar has been on the backfoot and the latest news to hit the dollar is the protectionist policies being followed by the US which is likely to affect the trade not only in the US but globally as well as the other major countries are also likely to follow suit. This is why the speech from Trump at the economic summit at Davos could assume significance as the market would like to know what he thinks about this.

Also, the pound has been strengthening on its own as well as we get closer towards the Brexit and there is a growing anticipation that the Brexit would be softer than what was initially anticipated. Both the UK and the Eurozone know how important the trade from the UK is and hence, they are unlikely to do anything to place that in jeopardy. In fact, there have been reports that the leaders have agreed to a deal where the Brexit would be similar to the trade access that has been granted to Norway, though this is something that is not yet confirmed by any party.

Looking ahead to the rest of the day, we do not have any major economic data from the US but we have the average earnings index from the UK which could bring in some volatility but we doubt whether this would do anything to bring in any major correction in this pair. The correction can be brought about only by the strengthening of the dollar but there are no signs of that, as yet.