GBP/USD Daily Fundamental Forecast – January 23, 2017

GBPUSD continued to trade strongly on the back of some dollar weakness and it looks set to gain more during the course of the day. The pound has continued to remain strong over the last week or so ever since it dropped just below 1.2000 on the basis of fears on how the Brexit process is likely to go. But with the UK PM May laying out the guidelines and making it clear that the people of the UK should be ready for  a hard Brexit, the clarity of thought helped to clear some of the risks and confusion surrounding the Brexit process and this in turn helped to push the pound higher and it continues to trade strongly this morning as well.

The UK is entering into an important week as the Supreme Court of the UK is going to pass its ruling on the Euro membership. It is expected that the court will say that the UK government has to get the approval of the Parliament for invoking Article 50 that will begin the Brexit process and if this happens, then we could see some more volatility in the pound. We believe that such a decision would be bullish for the pound as it will ensure that the process is well laid out and discussed among all members which will ensure that there is better control on the Brexit rather than resting the power to control it to a select few. On the other hand, this will likely delay the process as well as arguments and counter-arguments are bound to appear.

A combination of the ruling and the weakness in the dollar could push the GBPUSD pair through 1.2500 and we believe that the pair might ultimately aim for the 1.2700-2800 region. Looking ahead to today, we do not have any major economic news from the UK or the US and so we expect the dollar weakness theme to dominate the pair for today.