GBP/USD Daily Fundamental Forecast – August 17, 2017

The pound continued to be supported by some strong data from the UK and also by the weakness in the dollar but so far, that has not been enough to bring about a massive run up in the prices. The currency pairs seem to be trading in fairly large ranges and the GBPUSD pair also seems to be following the same pattern as the pair tried to break through the range lows around the 1.2860 but failed to get a clean break and has since bounced back again.

GBPUSD Back Into Range

Yesterday, we had the average earnings index data from the UK which came in stronger than expected. Before the data came in, the pair had briefly threatened to break through the 1.2860 region but once the data came in, the pound seemed to be well supported till the US session. The NY session brought in reports about the disbanding of the trade and policy council by Trump and this led to a bout of weakening in the dollar.

Then came the FOMC meeting minutes which did not lay out any timelines for balance sheet normalisation or for the next rate hike from the Fed and this was generally dovish for the dollar which led to another round of selling and this helped the GBPUSD pair to get off its lows and move towards the 1.29 region where it trade as of this writing. We expect the pair to continue to trade within its range and with the incoming data getting better, we could probably see the pair move back to its highs.

Looking ahead to the rest of the day, we have the retail sales data from the UK later during the London session and this is likely to bring in some volatility in the GBPUSD pair. If it comes in stronger, then we could see the pair targeting the range high at around the 1.3030 region in the short term in a continuation of the ranging while if it comes weaker then we should see the pair threaten the lows of the range. We are still bearish on the pair in the medium term and look for a move towards the 1.26 region during that period.