GBP/USD Daily Fundamental Forecast – January 13, 2017

Though the GBPUSD pair tried to finish higher for the day yesterday and it even managed to break through 1.2300, albeit briefly, during the day, the price action in the pound still does not seem to inspire any confidence in the bulls. As we mentioned, the dollar weakness across the markets helped to push the pair towards 1.2300 and it did cross that briefly but the way it was brought down after that and the way that it ended the day 100 pips lower from there and below 1.2200 should be a cause for the concern for the bulls in this pair.

The action and the move up that we saw in this pair was more related to the dollar weakness than any specific strength in the pound. The pound, by itself, looks weak as it was unable to hold on to the gains that it had managed to make against the dollar. If the pound finds it difficult to do so when the dollar is at its weakest, then we can well imagine what would happen to the pair if and when the dollar strength eventually returns. Most of the other currencies managed to hold on to the gains that they made against the dollar but not the pound and this should be a clear warning sign for the bulls.

Already, traders are quite wary about the pound due to the fears and risks surrounding the Brexit process and this inherent weakness in the pound that has been seen repeatedly should further embolden the bears and make them push against the pound harder, whenever they see a bounce in the pair. Looking ahead to today, we do not have any major news from the UK but we have the retail sales and CPI data from the US and if they come in strong, we might see a return of strength in the dollar.