GBP/USD Fundamental Analysis – week of May 14, 2018

The GBPUSD pair had a tight week of consolidation and ranging over the last week as the strength of the dollar faded away towards the end of the week but the pound bulls could not pick up the baton and run with it. As a result of that, the pair continues to trade near the lows of its range and it continues to remain in danger of falling off the cliff.

GBPUSD Continues Under Pressure

The week began strongly for the dollar though the news about the US pulling out of the nuclear deal in Iran seemed to have had little impact on the dollar in the short and medium term. But towards the middle of the week, the dollar began to weaken across the board due to the fact that the incoming data from the US failed to meet expectations. The inflation data came in weaker than what was expected and this placed a lot of pressure on the dollar as the NFP data had also missed expectations during the previous week. This should have normally led to a relief rally in the pair but that did not happen.

This was due to the fact that almost at the same time, we also saw the pound being hit upon by the BOE as the central failed to hike rates and they also failed to sound any timeline for the same. A part of the market expected the BOE to hike rates as they would not want to be left out in the race for hikes from the other central banks but that did not happen and they in fact raised concern over the UK economy as well. Due to this, the pound also became weaker and the pound bulls could not take advantage of the weakness in the dollar.

In the coming week, we will be seeing the retail sales data from the US and the dollar bulls would be hoping for a comeback with the support of some strong data. There would also be the average earnings index and inflation reports hearings from the UK but these are likely to have a lesser impact. The bulls in the pair would hope to hold the region around 1.35 and ensure that there is a rebound but so far, there have not been any such signs as yet.