GBP/USD Daily Fundamental Forecast – January 17, 2017

GBPUSD has been threatening to break down over the whole of last week but the weakness in the dollar had generally helped to mask the weakness in the pound to some extent. But we had been consistently mentioning in all our forecasts that the pound does look quite weak and there is nothing that will save it when stuff hits the fan and thats what we have seen over the weekend and yesterday. The pound did manage to sneak just above 1.2300 for a brief whole last week but was quickly brought down and it closed near the range lows last week.

Over the weekend, we got many media reports and general talk that the Brexit process is not going to be a soft one but is most likely to be a hard one and that it is important for the UK to start getting ready for the same. There is likely to be tough negotiations and it is also likely that the UK might lose all access to the freezone across the borders or it might have to pay a heavy price for access to the same. Either of these choices is likely to hit the UK economy quite hard and this news pushed the GBPUSD to open up with a large gap to the downside and it also briefly tested the region below 1.2000. It did manage to bounce back above this region during the course of the day but it continues to look weak.

Looking ahead to today, we have the UK PM May scheduled to make a speech today and it is expected that she would be laying out some guidelines for the Brexit process and also add some more information on how hard the process is going to be and that the exit from Eurozone would be full and not half here and half there. If she does specify something to that effect, then we can expect the pound to suffer very hard due to this and we may even visit 1.17 during such a move. For those who are not short on the pair yet, it is better to stay on the sidelines and wait for the dust to settle down.