GBP/USD Daily Fundamental Forecast – January 26, 2018

While the focus was clearly on the euro for most of the day yesterday, the GBPUSD pair had its own share of volatility that was driven purely by the strength and the weakness of the dollar over the entire day yesterday. The result of all that is the fact that the pair closed lower for the day yesterday in what is seen as a first sign of weakness in the pair for quite some time now. With this happening, the chances of profit taking and further weakness has increased.

GBPUSD Closes Weaker

The day began with the pound on a strong footing as comments from the US Treasury Secretary, that he would prefer a weak dollar, sent the dollar spiralling lower all across the markets. This was the signal that the dollar bears needed to sell it even further. But when this was happening, we had warned the traders of a correction as the weakness in the dollar and the move higher in the pair happened in the morning when the volumes are generally low. The selling also seemed a bit over the top with not much of fundamentals though the selling continued through the course of the day which helped the pair to push through the 1.43 region.

It was very late in the day that the US President Trump sought to play down the comments from the Treasury Secretary by saying that the dollar would continue to remain strong as the incoming data was strong as well. This helped the dollar to regain back some of its strength and with the first signs of reversal, the pound bulls were only very glad to sell off and take some of the profits that they have made over the last few weeks. This pushed the pair below through 1.42 and it trades just below that region as of this writing.

Looking ahead to the rest of the day, we have the preliminary GDP data from the UK and the advance GDP data from the US and both of these data points are likely to bring in some volatility. If the US data comes out strong, it would basically prove what Trump said and this could lead to a strong close for the week for the dollar.