GBP/USD Daily Fundamental Forecast – August 31, 2017

The GBPUSD pair stayed up as one of the strongest pairs during trading yesterday. The dollar managed to make a lot of progress against most other currencies but it turned out that the pound seemed to be the strongest currency of the day and the dollar could not make much progress against it. This restricted the volatility in the pair as the pound and the dollar were locked in a battle for supremacy and we saw the pair end the day almost unchanged.

Pound Stays Strong Amidst Dollar Recovery

The strength in the pair was mainly due to the month end currency flows which would have helped the pound to stay strong. We also expect the pound to continue to stay strong during the short term as the effect of the currency flows and the expectations of the outcome of the Brexit talks begin to rise and all these are expected to support the pound in the short term. Even strong data from the US could not make much of a dent on the pound and this should be a clear indicator of how strong the pound is at the moment.

Yesterday, the focus was clearly on the dollar as the ADP and the GDP data were scheduled to be released in the US. The ADP data came in stronger than expected at 237K while the Prelim GDP data also came in stronger at 3% and both these strong points of data helped the dollar to recover across the board. This led the GBPUSD downwards and it briefly threatened to break through the important support at 1.2880 but this moved was quickly reversed and the pair was back above 1.29 within a short span of time. This is where it continues to trade as of this writing and the pair seems to be locked between 1.2880 and 1.2960 for the short term. A breakout on either side could lead to a 50-100 pip move.

Looking ahead to the rest of the day, we do not have any major news from the UK and the US but we expect the GBPUSD pair to continue to trade strongly for the day which should bring the 1.2960 region into focus during the course of the day.