GBP/USD Fundamental Analysis – week of October 16, 2017

The GBPUSD pair rose during the course of last week more due to the weakness in the dollar rather than any strength in the pound as such. In fact, there was nothing fundamental in the pound to drive it higher and it was all about the dollar over the last 2 weeks. We believe that the pound is now in a choppy mode and this should lead to some consolidation and ranging in the coming week.

GBPUSD Moves Dominated by Weak Dollar

The dollar bulls were awaiting the FOMC meeting minutes and also the CPI inflation data. The point of note as far as the minutes was concerned was whether the Fed would continue to give hints about the next rate hike and whether the December rate hike was still open. But the Fed did not comment much on the monetary policy and this left the dollar bulls disappointed. The CPI inflation data also came in weaker though the retail sales data from the US was better. This marked a choppy week of data for the US.

On the other hand, the pound stayed steady during the course of the week as there was very little development in the form of fundamentals. One more round of Brexit talks ended with no sign of any significant progress and this has pushed the case of the Brexit happening without any deal happening between the UK and the Eurozone. This is likely to keep the pressure on the pound in the short and medium term as well, till the situation is sorted out.

The upcoming week is likely to be a busy one for the pound with the inflation data, retail sales and average earnings index data, all scheduled to be released during the course of the coming week. Also, we will be seeing the BOE Governor Carney making a speech as well and this is likely to keep the pound volatile and highly liquid during the coming week. The traders would do well to keep an eye on the 1.3260 region in the coming week.