GBP/USD Daily Fundamental Forecast – October 6, 2017

The pound crashed lower during the course of trading yesterday as the political uncertainty in the UK dominated the markets yesterday and this weakened the pound. It was only a few weeks back that the pound had made a strong recovery on the back of some good data, support from the BOE and the progress in the Brexit but from then on, it has all been downhill for the pound.

Pound Getting Hit by Uncertainty

One of the factors for this has , of course, been the incoming economic data from the UK which has been weak across the board. This is likely to tie the hands of the BOE for now though they may be itching to hike the rates to support the pound. They had mentioned as much in their last meeting but from then on, the data has basically failed them and so we do not see any reason for the BOE to hike just yet and this has been a blow for the pound.

The bigger blow, though, comes from the political circles as the leadership of the UK PM May is being challenged in her Conservative party. Her position in the party had never been strong ever since she got a reduced mandate and failed in her gamble to bring in snap polls but so far, she had been handling the situation deftly. But over the last 2 weeks, there have been increasing speculation on whether she would be able to continue beyond a year and this has put a lot of pressure on the pound. On a day by day basis, the calls for her resignation have been growing louder and if she does resign, it could lead to a lot of uncertainty and it would also affect the Brexit process in an adverse manner as well.

It is due to a combination of such reasons that the pound has been getting battered across the board over the last few days and it is believed that the weakening would continue in the short term unless and until the political uncertainty is cleared up. Looking ahead to the rest of the day, the focus would be on the NFP and wages data from the US and this, along with the political circus in the UK is likely to dominate the market headlines for the day.