GBP/USD Daily Fundamental Forecast – August 1, 2017

The GBPUSD pair spent much of the day yesterday within a tight range and in a consolidation mode. This range tightening was understandable as it was the last day of the month and the traders were probably positioning themselves for the new month. There was also very little fundamental news around and so the action was pretty much limited for much of the day.

GBPUSD Poised to Move Higher

But the volatility picked up late in the day as we moved towards the London fix. We had warned of month end currency flows in our forecast yesterday and these flows generally tend to affect the pound and the euro a lot. We saw some similar action yesterday as well as the pound got kicked higher as we moved into the London fix. This helped the pair to push past the 1.32 region and the bulls have ensured that they hold on to this region as we see the pair trading comfortably above this price as of this writing. This helped the pair to close the month in a bullish manner and it looks ominous for the month ahead as well.

The market is likely to wait for the BOE later in the week to decide on the next course of action but at the same time, the pair is likely to be buoyant leading up to the meeting. Though the general consensus is that the BOE would not hike rates this month as well, there is a small section of the market that believes that they would indeed go ahead and hike the rate and hence they are likely to position themselves accordingly. So, if the BOE disappoints, then we should see a small correction in the GBPUSD pair. The BOE has been a very strong supporter of the pound over the last few months and so this should be something that is going to be very close and interesting.

Looking ahead to the rest of the day, we have the Manufacturing PMI data from the UK and we have to wait and see how it pans out as the recent data from the UK has been mixed. We also have the PMI data from the US as well and we should see quite a bit of volatility in the coming days. We believe that the overall trend is up with the target being 1.34 in the short term.