GBP/USD Fundamental Analysis – week of April 2, 2018

The general theme of the markets all across last week was one of dollar strength and this led to an almost total reversal of the move from the previous week in the GBPUSD pair. During that period, the dollar was rocked by fears of a global trade war breaking out and this helped the pair to break through the psychologically important region around 1.40.

GBPUSD Back Towards 1.40

But this move higher had led to belief that the bulls in the pair would kick on and push through towards 1.45 but they were delivered a jolt over last week. The dollar strengthened all across the board and this caused the pair to fall. There was not much fundamental data or news all across the globe but there was a general improvement in risk sentiment as the fears over the trade war gradually receded due to the lack of any follow up action from any of the major global economies.

This helped the dollar to strengthen and lead the pair lower and it ended the week just above the 1.40 region. This should give some hope for the bulls in the pair as the close above the support region shows that the bulls are still in control but only by just. Also, last week, we saw a lot of month end currency flows as well and this was also one of the reasons for the pound to be under pressure. It remains to be seen whether the pound would be able to regain its strength in the coming week.

Looking ahead to the coming week, we have the NFP and wages growth data from the US which is likely to bring in a lot of volatility. We also have the construction, manufacturing and services PMI data from the UK and all these data would be considered as very important as each central bank would be looking to hike rates in the near future. The Fed has just completed a rate hike last month but the market expects atleast a couple more for the rest of the year and for that to happen, the incoming data from the US has to continue to be strong and hence each and every piece of data from the US would be watched closely and any sign of weakness would lead to a dollar sell off.