GBP/USD Fundamental Analysis – week of June 26, 2017

The pound turned out to be one of the most volatile currencies in the market last week, a week that was marked by general laziness and lack of volatility due to the absence of any fundamental and economic drivers in the market. It was the third week of the month and as is normal in such times, the economic news and events dry up and so the markets become directionless and so we see more of profit taking and position adjustment going on in the markets which reduces the volatility.

GBPUSD Continues to be Volatile

The pound has clearly been the star of this month with the UK elections, the confusion following the results, the BOE announcement and the voting pattern which showed three of the members voting for a hike, all of which ensured that there was large volatility in the GBPUSD pair. Though there has been a string of events that have affected the prices of the pair, it has been trading within a large range between 1.28 and 1.25 for much of this period.

Last week, we saw the speech from the Queen in the Parliament which was followed by the speeches from the Opposition leader and then by the UK PM May where she promised that she would work towards a soft Brexit and ensure that the UK gets its due from the Eurozone as part of the Brexit process. This helped to support the pound for sometime but then it was rocked by the speech from Carney where he said that he personally would not favor a hike in rates at this point of time as he believed that the UK economy was not ready for it as yet. This pushed the pound back to the range lows from which it managed to recover towards the end of the week on sustained dollar weakness.

Looking ahead to the coming week, we have speeches from a host of leaders of central banks from around the world including Carney and this is likely to keep the GBPUSD pair volatile. We are also going to see the GDP data from the US and also month end currency flows which tend to affect the pound a lot. So traders should be ready for another volatile week of trading in the GBPUSD pair with the 1.26 serving as strong support in the short term.