GBP/USD Daily Fundamental Forecast – December 09, 2016

GBPUSD had a weak consolidation day yesterday as it was affected by the fall in the euro. The day did began brightly for the pound as it recovered some of its losses from the previous day and managed to reach above 1.27 during the Asian and London session and in fact, it looked good for some more as well. But the ECB Press conference poured cold water on the move as the euro got thrashed and the EURGBP fell as a result. This acted as a weight on the pound as well as a result of which it was pulled back below 1.27 and fell down towards 1.26 and sits just below that, as of this writing.

The weight on the euro would continue to bug pound in the short term as well and hence we expect some more consolidation in this pair with a bearish bias as the euro sorts itself out. We have the Fed meeting scheduled for next week where the market expects a rate hike of 0.25%. This has already been priced in and so if the announcement does come in, we might get a surprise dollar weakness rather than strength in a buy the rumor-sell the fact kind of move which we saw last December as well. The liquidity is also likely to be low at this time of the year and so such moves either way should be easy. But, all these moves are news driven and we cannot predict which way the move would go at any point of time. As traders, it is important to go with the flow rather than try to predict what is going to happen.

Looking ahead to today, we do not have any economic news from the UK for the day and so we expect some more bearish consolidation in the GBPUSD pair which will continue to be weighed down by the weak euro.