GBP/USD Fundamental Analysis – week of May 7, 2018

The pound suffered from a very bad week as the pair fell further in what is seen as a massive reversal in its fortunes over the last few weeks. It was only a few weeks back that the pair was challenging its range higher above the 1.43 region and it appeared to be only a matter of time before the pair broke through on the back of sustained dollar weakness and also due to the fact that the Brexit process has been progressing smoothly.

GBPUSD Under Lot of Pressure

But all that has gone topsy turvy over the last few weeks as the pair has reversed very strongly from the highs of the range and has fallen towards the 1.35 region over the last week on the back of some serious dollar strength that has been seen all across the markets over the last couple of weeks. But the dollar strength is only a part of the overall reason as the pound itself has been under a lot of pressure and has been weakened due to the political issues within the UK.

The local body elections has not handed the large majority that the UK PM May needed to strengthen her position and this uncertainty and lack of strength for the government has also affected the pound in an indirect manner over the last few days. This is reflected in the large fall that we have seen in the GBPUSD pair during this period as it stares at the support in the 1.35 region as the last chance for the bulls to redeem themselves in the short and medium term as well. The data has also been generally flat or weak from the UK and has failed to support the pound.

In the upcoming week, the UK and the pound are expected to be in the limelight as we have the HPI data, manufacturing production dataand the inflation report as well. We are also going to see the rate decision from the BOE though it is generally assumed that the BOE would not be in any position to think about a rate hike this time around due to the turmoil in the economic and political circles in the UK. On the other hand, the dollar is expected to continue to be strong in the coming week as we expect the speech from the Fed Chief and also the PPI and the CPI data from the US. It is going to take a mammoth effort from the pound bulls to sustain the prices above the strong support region of 1.35 in the short term.