GBP/USD Daily Fundamental Forecast – October 30, 2017

The pound continued to suffer due to the weakness in the euro and the strength of the dollar and corrected below 1.31 for a brief while before a late recovery on Friday helped it to move back above 1.31 and it continues to trade in that region as of this writing. The pound is likely to stay weak due to the strength of the dollar in the short and medium term and any bounce should be viewed as an opportunity to sell.

GBPUSD Under Pressure

There has not been any major fundamental change as far as the UK economy is concerned, over the short term. The uncertainty around the Brexit process continues to hang over the pound but this should have had little effect on the pound as this is something that has already been priced into the markets. But the fact that the ECB chose to extend the QE has had a profound effect on the markets as it has led the European stock markets higher and this has had an inverse effect on the respective currencies as it has made them weaker.

On the other hand, the dollar continues to hold steady and looks to get stronger in the short and medium term with the data getting slightly better. Any more strong data during the course of this week from the US should more or less confirm the rate hike in December from the Fed and this is likely to push the dollar further higher against most of the other currencies. Also, with a renowned hawk in John Taylaor being in contention for the Fed Chair, the dollar has got a further boost though it remains to be seen who would actually become the chair.

Looking ahead to the rest of the day, we do not have any major news from the US or the UK for the day but as we approach the month end, we are likely to see a lot of month end currency flows and this is likely to keep the pound volatile for today.