GBP/USD Daily Fundamental Forecast – March 27, 2018

The GBPUSD pair has been trying very hard over the last few days to break through higher, on the back of dollar weakness, but so far it has not managed to do so. We believe that it is only a matter of time before the break happens as the dollar gets beat up all across the board. This seems to be a more medium and long term play for the dollar despite the rate hikes and the general hawkishness around.

Pair Moves Higher

There are several factors in play for the weakness in the dollar, short and long term. For the short term, it is due to the decision of the US government to impose tariffs on Chinese goods which has increased the risk and uncertainty over the future measures and also what kind of reaction it would elicit from the other countries. This is a continuation of the nationalistic policy followed by this US government and this has led to concern over the long term impact.

Such a policy and the following measures are likely to impact the global trade balance and could not only lead to a global trade war but also force the other countries to begin to follow similar measures and it is well known that such policies are likely to be detrimental to any kind of economy, big or small. This is likely to be the long term impact on the dollar as it comes under pressure. The Fed is also not sure of more than 3 rate hikes for this year and again, this is against some of the market expectations as well.

It is a combination of these factors, plus the smooth progress in the Brexit deal, that has been helping the GBPUSD pair to move higher in a slow and steady manner and we could not be surprised if the month end currency flows over the next few days is enough to push the pair into a breakout higher and launch it towards the 1.45 region.