GBP/USD Daily Fundamental Forecast – August 16, 2017

The GBPUSD pair suffered a double blow yesterday which pushed the pair lower through the 1.29 region and it now trades much below that figure as of that writing and continues to look very weak. We had been mentioning in our last few forecasts that the fact that the pair has not been able to move back above the 1.3030 region, which it broke through last week, should be a matter of concern for the bulls and that it could lead to a larger correction in the pair if it is unable to break through soon.

GBPUSD Moves Lower On Weak Data

That scenario played out yesterday as the last few days of consolidation was followed by a move lower yesterday. The first blow came in the form of a lower than expected CPI data which came in at 2.6% when the expected value was 2.7%. Though the miss on the inflation data was very little, it was enough indication that the BOE would have no chance of hiking rates anytime soon. The BOE had already been in 2 minds on whether to hike rates at such an important juncture in the Brexit process and this weak data would help it to make up its mind against it.

The second blow came in the form of strong retail sales data from the US which has helped to prop the dollar. The dollar bulls had been hoping for things to improve on the data front and with this data and the NFP for this month coming in stronger, we could be in for a turn around in the dollar and this led to a bout of selling in the GBPUSD pair which pushed it through 1.29 where it trades as of this writing.

Looking ahead to the rest of the day today, we have the average earnings index data from the UK and the FOMC meeting minutes from the US where the Fed members are likely to give their opinion on how they are going to go about balance sheet normalization. This could turn out to be positive for the dollar which could in turn lead to further correction in the GBPUSD pair.