GBP/USD Fundamental Analysis – week of December 11, 2017

It was a tight week of trading for the GBPUSD pair as it could not move much on either side as each day brought about a different kind of development in the Brexit process and the pound was not sure which direction it wanted to move to. It finally ended the week almost at the same price where it began and it also ended the week just above 1.34 in anticipation of the developments in the coming week.

GBPUSD Caught in a Range

Over the last 10 days or so, we have had a situation where we had been quite sure that a Brexit deal was only days away. This was then dealt a blow as the DUP party refused to accept the Irish border agreement and this proved a setback to the UK PM May and also to the deal as such. This placed the pound under pressure as the prospect of the UK walking out of the talks with no deal increased and this surely was not good for the UK economy. But as the week progressed, there were some significant developments in the Brexit talks and by the end of the week, we were back in a situation where it looked as though a deal has been done and it only requires the Irish parties to agree for it to be announced.

On the other hand, the dollar also remained quite strong during the course of the week and in this, it was helped by the strong incoming data in the form of ADP and NFP data which came in stronger than expectations. The market also waited in anticipation of the rate hike from the Fed next week and also news on further rate hikes next year.

Looking ahead to the coming week, we have the FOMC rate announcement when the rates are expected to be hiked and we also have the PPI, CPI and retail sales data from the US. All of these would be done ahead of the holiday season in the US and should guarantee volatility in the pair. We can also expect the Brexit process to hog the headlines in Europe and we have the BOE rate announcement as well along with the monetary policy summary. A jam packed and volatile week ahead !