GBP/USD Fundamental Analysis – week of March 20, 2017

GBPUSD had one of its best weeks in recent memory as the pair rose close to 300 pips for the week and closed the week near its highs which should bring cheer to the bulls in this pair. The move up was helped, in no small measure, by the weakness of the dollar across the board which helped the pair to rise from its lows near 1.21 through 1.2200 and 1.2300 and it now trades just below 1.24 to close the week and it continues to look bullish.

Is The Pound Turning?

The GBPUSD was helped in its flight, ironically, by the US Fed which chose to hike rates but at the same time, not promise too much for the bulls in the future. The dollar bulls had been expecting a strong statement which would specify or atleast give some hints on the timeline for the next hike but we did mention that, considering the past history of the Fed and its statements, it was something too much to ask for. The Fed statement chose to strike the middle path by saying that the future hikes would depend a lot on the incoming data and thats how it should be. This did not satisfy the greedy dollar bulls and they showed their anger by selling the dollar which helped to push the GBPUSD pair through 1.2200.

Later in the week, the pound got a boost when it was the turn of the BOE when it became known that one of the members had voted for a rate hike to bolster the economy. This helped the GBPUSD to push through 1.23 and it closed the week close to its range highs and just below 1.24.

Going forward, we expect the pair to continue to be bullish in the short term, but with the Brexit process just about to begin, we believe that the pound will be under pressure and so we expect the GBPUSD pair to trade weakly in the medium term. Apart from the retail sales data from the UK, we do not have any major news from the US or the UK in the coming week but due to the above reasons, we believe that this bounce in GBPUSD is likely to be short lived and hence the 1.25 region might be a good place to go short against.