GBP/USD Daily Fundamental Forecast – March 16, 2017

The GBPUSD got a huge boost following the FOMC rate announcement and statement and this helped the pair to move cleanly through 1.2200 and above the resistance at around the 1.2250 region which has been holding back its move over the past week or so. The pair did push through 1.2300 but it could not sustain the move for long and trade well below that figure as of this writing. But it should be noted that despite this move, we are still not bullish on this pair and we believe that it is only a matter of time before the pound weakens again.

GBPUSD Rises On Dollar Weakness

Yesterday, late in the US session, we saw the FOMC rate announcement which hiked the rates by 0.25% and this was widely expected and priced into the markets. What was looked forward to was the accompanying rate statement and the press conference from Yellen but both of these turned out to be a big disappointment for the dollar bulls. Though they got the rate hike and this also confirmed that there would be 2 more hikes this year, they had expected the Fed to lay down clear timelines on when the next rate hike would be. But the Fed chose to tread the safe path by saying that the next hikes would be dependent on the incoming data and this was interpreted as not hawkish by the markets.

As a result, the dollar weakened across the board and this helped to boost the GBPUSD. It is to be noted that this upmove is mainly due to the weakness in the dollar and this does not make the weakness and uncertainty surrounding the pound go away. That is why we expect this bounce to be temporary and we could see the pair returning back towards 1.2100 once the Article 50 is kicked off later in the month.

Looking ahead to the day, we have the monetary policy summary and rate announcement from the UK which is expected to maintain status quo and probably sound a little bullish in the summary. This is expected to keep the GBPUSD pair well bid during the course of the day and we could see a visit towards 1.23 and further during the course of the day.