GBP/USD Daily Fundamental Forecast – January 20, 2017

GBPUSD spent the day yesterday consolidating in the middle part of its range but with a bullish bias the strength of the dollar waxed and waned during the course of the day. There was not much economic data or events during the day which affected the pound or the dollar in any specific direction and this was reflected in the way that the GBPUSD pair traded in a very tight range despite all the volatility in the other pairs around it. This is set to continue for today as well as the markets look for a new impetus from somewhere in a specific direction.

Both the pound and the dollar are likely to volatile in the short and medium term as both are set to undergo some irreversible changes during the course of the year. While the dollar is set to welcome in the new Trump administration and along with it, a period of spending, infrastructure growth and a lot of uncertainty and risk as well, the pound is also set to welcome a new dawn with the UK leaving the eurozone and along with it, losing the access to the trade zone of the euro. These events are bound to affect both the currencies to a very great extent and each of these events are associated with a lot of uncertainty and risk and it depends on how of these economies respond to the changes. One common thing between them is the fact that their underlying economies are still very strong and the economic data from both these countries do show that and this should give some cheer to the long term investors. But what this also promises, is a lot of volatility in both these currencies.

Looking ahead to today, we have the retail sales data from the UK which will be released during the London session and we believe that the data would continue the trend of strong data coming out of the UK in recent months. If this does happen, we could see the pair challenging 1.2400 again.