GBP/USD Fundamental Analysis – week of July 17, 2017

The pound was away from the spotlight for a change for the whole of last week after being volatile and being rocked this way and that over the past few weeks. The focus was squarely on the dollar for the whole of the week but even the dollar did not have much volatility during most of the week but the weak CPI and retail sales data from the US towards the end of the week helped the GBPUSD pair to rip higher and close near its highs.

GBPUSD In Tight Consolidation Mode

We had mentioned in our forecast last week that the region around 1.3030 is likely to be the key and hence is likely to act as the ceiling for the pound in the short term and this proved to be right for the most of last week. The pair never managed to even get close to 1.30 for most of last week and with the region around 1.28 acting as strong support, we saw the GBPUSD pair trade within a tight range for most of the week in a consolidation mode. The little data that came in from the UK like the manufacturing production data and the average earnings index data were not enough to push the pair in any specific direction.

The traders were looking towards Yellen to provide some of the direction for the week but with Yellen choosing not to speak much about the monetary policy in her testimony, there was not much to drive the markets in any specific direction for most of the week and this could be seen in how the markets lacked volatility for most of the week. But the CPI and retail sales data from the US turned out to be weak and this helped the pair to push through 1.3030 and end the week on a bullish note.

Looking forward to the coming week, we can see the focus shifting from the US to Europe for the next week. We have the retail sales data from the UK for the next week but we continue to believe that the region around 1.3030 would be support in the medium term, especially with a large risk event like the Brexit process looming right ahead.