GBP/USD Daily Fundamental Forecast – December 1, 2016

GBPUSD, as expected, did have a lot of volatility in the closing days of the month. This is a general phenomenon more to do with EURGBP rather than with the pound itself. With the month end approaching, we see many payments go through on either side of the UK border and one of the big payments is what the UK has to pay the EU for member ship. This puts a lot of pressure on the pound and this causes the pound to fall. The challenge here is the fact that no one knows when exactly the payments go through and also, no one would know how the pound would react after coming under pressure. Sometimes, the pound would continue to go lower while on other days, like yesterday, the prices would snap right back.

The pair showed remarkable resilience yesterday not only to snap back after coming under pressure of month end flows but continue to hold its own as the dollar strength returned during the course of the evening yesterday. So, though we did see a dip towards the low 1.2400s, the price snapped back and pushed through 1.2500 and trades comfortably above this, as of this writing. The pound has shown good strength despite all the turmoil caused by the dollar against the other currencies and it has emerged as the only currency that continues to trade higher against the dollar than when it did immediately after the US elections.

Looking ahead to today, we have the Manufacturing PMI data to be released from the UK and any good figures from this data could add even more fuel to the strength of the pound and push it higher towards 1.2600 while a weak figure could bring under some pressure but considering the price action over the past few days, we doubt whether any slip in the data will bring in any major weakness in this pair for today. So, expect some more consolidation for today.