GBP/USD Daily Fundamental Forecast – December 06, 2016

The pound continues to trade strongly, aided by the strong upmove seen in the euro which has helped to keep the dollar soft. This has been fully utilised by the pound and as mentioned yesterday in our forecast, the GBPUSD pair continues to push through 1.27 and sits just below 1.2750 as of this writing. The pair looks good for more as the US yields continue to fall and the dollar continues to remain soft.

Yesterday, we saw the release of the Services PMI which came in at a better than expected value of 55.2 against the expected value of 54.2. This continues the trend of improving data since the Brexit vote and shows that the UK economy continues to remain strong despite it deciding to go it alone in the Euro region. The real challenge to such data will arrive once the Article 50 is declared and the actual Brexit negotiations and process begin. It remains to be seen what the UK is going to get from the Euro region and what the Euro leaders are willing to offer to the UK once it leaves. The UK will expect the free market access to continue as much as possible but the Euro leaders would not want themselves to be seen to be giving too much away as this might be used by other countries to negotiate similar deals with them. The data that comes in after the process is done will reflect the true state of the UK economy.

Looking ahead to today, we do not have any major economic news from the UK and so we can expect the upmove in the pair to continue and we could see a push through 1.2800 if the weakness in the dollar continues. As mentioned yesterday, we could see a challenge to 1.30 in due course of time but overall downtrend is still intact and hence, once the bounce is over, we could see the pair heading down again.