GBP/USD Fundamental Analysis – week of March 13, 2017

GBPUSD traded pretty weakly for most of the week as the dollar strength and the uncertainty over the UK economy continued to plague the pound and kept it under pressure during the course of the week. The dollar strength was a bit off and on and while it was quite strong against a few currencies, it ended the week lower against a few others like the euro. But the day in which Article 50 will be invoked is getting closer and closer and with this,the uncertainty and fears also increase and this is what has dragged the pair below 1.2200 during the course of the week and it has not been able to get back above it so far.

Pound Suffering from a Strong Dollar

We have been mentioning this for quite some time now that every bounce in the GBPUSD pair should be treated as an opportunity for traders to go short on this pair. As long as the Brexit process goes on, we believe that it would be difficult for the pound to post any kind of a serious recovery and with the dollar likely to strengthen across the board in the medium term, as a result of improving economy and rate hikes, we feel that this pair would be the instrument in which the pound weakness is felt the most.

Last week, we had a strong employment report, both in the form of the ADP report and also the NFP report, which kept the dollar bulls interested and though we had a bout of profit taking from the dollar bulls towards the end of the week, none of this helped to shore up the GBPUSD prices and we saw the pair continue to trade nears its range lows towards the end of the week.

Looking ahead to the coming week, we have the claimant count change data, earnings index, rate announcement and rate statement from the UK. We also have the PPI, CPI and retail sales data from the US and all of these should keep the pair volatile. But to top it all off, we have the FOMC rate announcement and statement where the market expects the Fed to hike rates and also have a hawkish statement following it. It remains to be seen whether the statement is going to be hawkish enough for the bulls as the hike and most of the hawkish stance are already priced in and it would take some serious guidance for the bulls to be encouraged to push the dollar up again. If that happens, we could see GBPUSD testing 1.2000 pretty soon.